Retirees to feel the sting if same job, same pay hits BHP

“Any changes which have the effect of reducing dividends will have an impact on investors who rely on dividend payments as a supplementary or primary source of income,” he said.

Equities account for 30 per cent of total SMSF assets and nearly half of all fund members were at least partially in retirement phase, he said.

Future Fund chairman Peter Costello said the sovereign wealth investor’s high exposure to BHP was not driven by dividends but because it mirrored the index – BHP is the biggest company on the ASX. However, he questioned the benefit of Labor’s industrial relations reforms.

“You have to ask yourself whether this proposed new legislation is going to boost productivity, and I haven’t seen any evidence that it will,” he said.

Australian Shareholders’ Association chief executive Rachel Waterhouse said if the proposed reforms translated into lower dividends, it would hurt many businesses and organisations. “It’s good that a company is highlighting potential risks,” she said.

Qantas offered a lesson about businesses’ social licence to operate, and their responsibility to comply with workforce regulations and act equitably, Ms Waterhouse added.

“Often when you cut something, it impacts that long term, and that’s the example of Qantas,” she said.

She said investors should always look at a company’s hiring strategy, what it is reliant on and any inherent risks, including the legal risk of underpayments.

AustralianSuper, UniSuper, Aware Super and AMP all declined to comment on their BHP holdings and the expected dividend hit.

Term deposits better?

Adviser Liam Shorte, of Verante Financial Planning, said the impact of the industrial relations reforms could take BHP’s dividend yield to just below 5 per cent. While SMSF investors were used to the cyclical nature of resource stocks, the change might cause some people to pay more attention to term deposits.

Among questions his clients were asking was if now was a time to trade BHP stock or tilt further towards term deposits amid higher interest rates.

“A lot of SMSF trustees have considered moving some money across to risk-free term deposits,” he said.

He said they were wondering whether to take the risk for a 4.7-5 per cent dividend yield or to go for a term deposit that is paying 4.7 per cent.

“With BHP, you’ve got some upside on growth, from a company that’s shown a great long-term track record. But we do know this is going to be a volatile decade. So, I know there are already SMSF trustees moving funds to back in term deposits and annuities because that 5 per cent rate is their key target.”

However, he said most clients were happy to back BHP and understood that industrial relations changes were part of doing business.

“Most clients are happy to have it [BHP] in their portfolio. Back in 2019, we were looking at dividends in the 70¢ and 90¢ area, so to be up still above the dollar – they’re more than happy to have that.”