Perth-based gold and antimony producer, Alkane Resources, has announced its first-ever dividend in its nearly 60-year history, potentially heralding a new trend among small and mid-cap ASX-listed companies. Alkane Resources is a mining company that primarily produces gold and antimony, a critical mineral used in flame retardants, batteries, electronics, and specialised military equipment. This historic payout arrives amidst a surge in demand for dividend-focused investments, intensified by recent federal government changes to capital gains tax (CGT). Australians have increasingly shifted funds into exchange-traded funds (ETFs) focused on dividends, bonds, and cash, with Betashares reporting a doubling of inflows into cash and fixed-income ETFs to $1 billion in June.
On Tuesday, Alkane Resources confirmed a fully franked dividend of 2¢ per share, subject to final audit and board approval. While Alkane’s chief executive, Nic Earner, initially attributed the decision to the company’s robust balance sheet and record operating cash flows of $174 million, he conceded the cash dividend would attract investors. Fund managers, however, suggest a more direct link to the CGT reforms. The government’s forthcoming tax changes will see individuals pay tax on the total investment gain, adjusted for inflation, when selling assets, rather than the current 50 per cent discount. Lowell Resources Funds’ John Forwood stated that Earner had previously indicated CGT reforms influenced the decision to offer a dividend over a share buyback.
Industry experts anticipate more companies will re-evaluate their capital allocation strategies in response to these tax adjustments. Wilson Asset Management chairman Geoff Wilson expects a significant increase in companies prioritising fully franked dividends, aligning with investor preferences for income over inflation-adjusted capital gains. Morningstar equity analyst Shaun Ler noted the CGT changes create a “comparative advantage” for dividend investors, even in a low-yield environment. Conversely, Bhanu Singh, Australian chief executive of Dimensional Fund Advisors, a major Alkane shareholder, cautioned investors against solely chasing dividend yields, stressing the importance of focusing on long-term total return, which encompasses both dividends and capital growth.
