The ASX dividend deniers have returned, but here's the good news for income investors

If there's ever a year that proves the old-school 'set-and-forget' approach doesn't work, it's 2025.

The good news is, ASX dividends are still generating strong income, particularly when compared to cash and so-called safe asset classes. The big challenge is knowing where to move to get those dividends and franking credits. 

Signals from ASX February reporting

If I had to give it a score - the latest round of reporting was a 6/10 for income investors. There were some big highlights like Qantas Airways (ASX: QAN) and A2 Milk Company (ASX: A2M) re-instating dividends.

What has been buried beneath the headlines is the fact the average dividend increase across the ASX during the February reporting period was 20%.

Averages can be skewed of course - for example, we had South32 Limited (ASX: S32) with an 800% increase in dividends - but it's certainly not the horror story some are making it out to be.

If you look at the median dividend increase, it was around 5%. That means that a typical company has increased dividends greater than the rate of inflation. 

Where the story sours though is our big miners. BHP Group (ASX: BHP), Rio Tinto (ASX: RIO), and Fortescue (ASX: FMG), all cut their dividends.

But these cuts came off the back of enormous dividends and special dividends delivered by the mining giants in recent years. 

To give you an idea, between 2018 & 2024 BHP, Rio Tinto, and Fortescue delivered 13.83% in total (or almost 2% p.a.) for investors in The Plato Australian Shares Income Fund.

The dividend bonanza from the miners lasted much longer than many experts anticipated. It has now cooled in line with the price of Iron Ore, but you got to remember some of the current yields are still healthy - they really are still high-yielding stocks

• BHP announced 50 cent (USD) dividend, which equates to a 6.7% annual yield
• Rio announced a $3.55 dividend, which equates to a 7.4% annual yield
  
• Fortescue announced a 50 cent dividend, which equates to a 10.2% annual yield 

The biggest cut came from Fortescue, because it's a pure-play iron ore miner, however our house view is the iron ore price will stabilise around current levels. 

We remain slightly more positive on Rio and BHP moving forward. They've been able to increase copper production and copper prices have still stayed strong. While everyone is focussed on the price of gold, the strong copper price is flying under the radar. 

Our highly active strategy means we can move in out of stocks and sectors based on our forward-looking quantitative and qualitative analysis. 

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So with resources payouts facing a bit of a crunch, here's what all us income investors can be positive about.

The Aussie consumer is still showing strength

The graphic below from CBA illustrates this. Spending on discretionary items is now positive amongst all the different age cohorts. If you go back six months ago, spending was going backwards amongst younger people, but that's now turned positive, albeit greater strength still remains in the older age cohorts that own their own home.

This consumer strength was reflected during February results releases. 

JB Hi-Fi Ltd (ASX: JBH), was able to increase sales by almost 10%, increase profits by 8%, and noted strong January sales. 

JBH also announced an 8% dividend increase, which is a great outcome for this key holding in the Plato Australian Shares Income Fund

On a side note, whether JBH is actually a consumer discretionary stock or a consumer staple is up for debate. We actually consider it a bit more of a consumer staple these days, as people just can't cut back of things like home office electronics and mobile devices which have become a critical part of our personal and working lives. 

Insurance stocks looking good

February brought great results from the insurers, including Suncorp Group (ASX: SUN) and QBE Insurance (ASX: QBE). 

Suncorp's profits were 10% above expectations and up 73% on the year. They've increased their dividends by just over 20%, and then they also paid a special dividend of 22 cents through selling their banking division to ANZ.

It was also a good period for QBE. They've simplified their business and have reduced the risk in their portfolio. They've been able to increase their profits 27% on last year and increased their dividend by 31% (Only 20% franked as a lot of their profits are earned overseas).

We see three key reasons to be positive on insurers.

1. They've been able to increase their premiums significantly over the last couple of years.
   
2. They're coming off higher investment earnings in the higher interest rate environment.
   
3. It's been a benign claims environment. We certainly hope readers in Queensland and Northern New South Wales are doing well, but it appears Cyclone Alfred could have been much worse, and insurers won't need to deal with the same level of damage caused by more extreme weather events seen in prior years. 

The bottom line on dividends for the remainder of 2025

Despite all the noise in recent days about the so-called Trump-slump and sell off in high-flying tech stocks, when it comes to dividends, the Plato team believes we've seen the worst of the dividend cuts at the market level.

I've been sharing this chart showing Plato's proprietary dividend cut model with financial advisers at Pinnacle Investment Management Group's Insights Series event being held across Australia this week. 

Our dividend cut model is comprised of a number of predictive fundamental factors at the stock level. Whilst the model is used at the stock level to predict the likelihood that a company cuts its next dividend, we can aggregate the model across all stocks in order to represent a macro view regarding the likelihood of dividends cuts across the market. 

The model has a very sound track record of accuracy.

Currently it's showing the probability of dividend cuts is what we would describe as a normal range.

So while you can expect to see more dividend deniers emerge over the coming weeks or months, we think Australian dividend income will still continue to be a pillar or strength for retirees and other income seeking investors. 

Below, I invite you to watch a reporting season wrap-up video I recorded with Plato's Senior Portfolio Manager Peter Gardner and Kyle Macintyre from Pinnacle Investment Management. 

Could the Plato Australian Shares Income Fund or Plato Income Maximiser Ltd (ASX: PL8) enhance your retirement income portfolio?

Plato Investment Management's Australian equity income solutions have long track records of delivering market-beating income, along with capital growth. 

Since inception in 2011, the Plato Australian Shares Income Fund has out-performed the ASX200 by 0.6% and delivered a 9.5% yield (after fees, as at 31 January 2025). Click here to learn more on the Plato website or ask your financial adviser. 

Plato Income Maximiser Limited (ASX: PL8) is Australia's first Listed Investment Company to target payment of monthly income. Accessible on the ASX, its investment strategy is based on Plato Australian Shares Income Fund. Search the ticker PL8 on your brokerage platform.