ASX 200 to post one-year double-digit gains: CommSec

Despite mounting fears that a US correction is overdue, share trading platform CommSec expects the benchmark S&P/ASX 200 index to rise by 10% over the year and end the June 2023 quarter in the 7,100-7,400-point range.

Despite weaker earnings growth projections in FY23 and FY24 as the economy slows, CommSec chief economist Craig James reminds investors that share market’s valuations have become more attractively priced.

As case in point, the price/earnings (P/E) ratio has dropped to 13.7 times from 17.7 times previously.

With central banks continuing to lift interest rates to combat soaring inflation, James expects local investors to pay closer attention to company valuations and earnings, especially in light of a likely squeeze to company profit margins due to higher costs, and de-stocking/discounting as supply chain disruptions abate.

Meantime, the dividend yield of 4.6% is around the historical average since the mid-2000s.

Recent ASX performance

According to Commsec data, indexing the All Ordinaries index and the All Ordinaries Accumulation index at January 2004 reveals that the share prices (All Ords) have more than doubled in the period since (up 120%), while total returns have risen almost five times.

Other noteworthy milestones include:

• The differential (dividend growth) especially widened from the low point for shares after the global financial crisis (GFC) in February 2009.

• Aggregate revenues rose by 10.6% over the 12 months to June 30.

• 87% of companies lifted their revenues.

• Average increase in revenue was 34.5%.

• Aggregate statutory net profits lifted by 56.3 per cent (up 36.5% if BHP is excluded).

• Average increase in profit across the 132 companies was 41.8%.

• Just over 27% of dividend payers announced cuts in dividends, above the historic average.

Source: Commsec

Groundhog day

James also reminds investors that the issues which preoccupied the market over the last six months, notably inflation, interest rates and cost of living will continue to dominate over the coming year.

"For investors, it will simply be a case of analysing which companies respond best to the challenges," James noted.

Payday

Based on CommSec analysis, over $42bn in dividend payments is expected to be paid to shareholders, following last month's reporting season, by October.

By comparison, around $36bn in dividends was paid out the February 2022 and over $41bn in dividends following the reporting season in August 2021.

The week ending September 23 will be the busiest period for dividends with $17.4bn to be paid out to shareholders.

Source: Commsec