High Dividend Stocks & ETFs in Focus Amid Australian Banks Rate Cuts

Since August, a total of 23 banks have reduced interest rates on at least one of their term deposit offerings.

From a banking perspective, the local mortgage market is fiercely competitive. Since the beginning of the year, Australian banks have been racing to sell mortgages and deposits, which have squeezed margins. According to Tim Waterer, a market analyst at KCM Trade, lowering lending rates might be an attempt by banks to introduce some balance in their operations.

From a broader perspective, it largely relates to what central banks globally are expected to do with interest rates, especially in the context of Federal Reserve Chairman Jerome Powell's most explicit signal for a rate reduction at last Friday's Jackson Hole symposium. Despite slow progress in combating inflation in Australia, there has been some easing in July. The Australian Bureau of Statistics reported that July's CPI fell to the lowest level since March at 3.5%. Laine Gordon from RateCity suggests that banks preemptively reducing rates could help mitigate their profit margins pressure under these circumstances.

As deposit rates continue to decline, high dividend stocks and ETFs are becoming increasingly attractive for investors seeking stable and potentially growing income. In the Australian market, we have identified the top 10 best-performing companies year-to-date. Each of these companies boasts a market capitalization exceeding AU$10 billion and offers a dividend yield that ranks them within the top 35.

Meanwhile, certain ETFs are strategically designed to prioritize stocks known for paying consistent and reliable dividends to their shareholders. Often referred to as 'high yield' or 'income' ETFs, these funds are attracting significant attention and investment. According to Roger Daniel, senior investment products specialist at ASX Limited, dividend-focused ETFs saw an influx of over $600 million in new investments in 2023 alone.