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The data doesn't lie: dividends on Resources versus Industrials

(Editor's introduction: Peter Thornhill is well-known to our readers for advocating a multi-decade investment strategy based on the long-term merits of industrial companies for income. For example, to show his consistency over time, some of his previous articles in Firstlinks are here and here and here. In this short update, he again checks the long-term return from industrial shares, but this time, he makes the comparison with resource stocks. He argues that for investors with the right risk capacity and investment horizon, there's only one place to invest).


The current resource bubble and the flow of healthy dividends will no doubt have many investors salivating. Whilst my long-term charts are based on calendar year, this article looks at the last three financial years to bring my analysis up-to-date.

The table below takes 2019 as the starting point and looks at the dividend changes for financial years ending 30 June 2020, 2021 and 2022 for Industrials, Resources and the All Ordinaries.

Resource dividends come and go

Clearly, the impact of Covid effected industrial companies as dividends were suspended or reduced during this unsettling period, while the spectacular jump in resource dividends was driven by surging prices and demand for commodities.

Resource bubbles are a fact of life and jolly fun for speculators, but we must not lose sight of the longer-term impact. Index funds will have been selling industrials to buy resource stocks and when the bubble bursts, they will be selling resources to buy back the industrials. I wait to see the impact on distributions from these index funds post the change.

The charts below cover the last 41 years of performance for the price and accumulation indices. A picture is worth a thousand words!

Digging stuff out of the ground is all well and good but the real value add comes from the manufacturing, intellectual and technological inputs, not labour.


Peter Thornhill is a financial commentator, author, public speaker and Principal of Motivated Money. He runs full-day courses explaining his approach to investing "in the vain hope that not everyone is frozen with fear".

Peter extends his thanks to Angus Gluskie, CEO of Whitefield, for his assistance with the data.

This article is general in nature and does not constitute or convey specific or professional advice. Share markets can be volatile in the short term and investors holding a portfolio of shares will need to tolerate short-term losses and focus on a long-term horizon, and consider financial advice.


September 10, 2022

the anti-woke Coal & Energy stocks are pumping it currently. Even Buffett has loaded up.

September 10, 2022

yes and in the future our great grandchildren will be so pleased that we caused so much damage to the world in the pursuit of quick money....

SMSF Trustee
September 10, 2022

CC the mining and use of fossil fuels has never been about quick money. Very much a long term game for those businesses. And fir society it's been about driving industries for long term growth, employment etc AND for keeping us warm in winter.

The arguments in favour of backing away - perhaps rapidly - from fossil fuels are mostly well-made, but yours isn't one of them. Focus instead on arguing for a better long-term future using renewable, which are becoming cheaper and more effective at carrying base loads and achieving the economic and social goals that fossil fuels have traditionally aimed for. Then you won't sound like just a ranting left-winger.

September 09, 2022

RBA has resources as higher. Stop cherry picking please. Over the long run, the different industrial sectors have generally performed quite similarly, although there have been periods of over and underperformance (Figure 2)

September 10, 2022

Truth, that's an excellent article, thanks for sharing

September 07, 2022

There's no harm in holding some BHP, WDS, RIO, MIN, PBS etc for dividends, as part of a well diversified portfolio, especially for when the resource cycle is doing well and spitting out cash! In fact many LIC's (ARGO, AFI, BKI) do, the exception being WHF. Then again WHF also owns a lot of AREIT's which aren't always a good sector to be in! Moderation in all things perhaps? It's not black and white!

September 07, 2022

Agree. And the XMJ materials index has far outperformed the XPJ property index over the past 20 years, XMJ up over 300% versus less than 10% for the XPJ !!

September 07, 2022

The chart my online broker produces says XMJ has gone from 10000 to 15500 over the last 10 yrs.
XPJ has gone from 940 to 1360.

Thats 55% for mining & 44% for REIT.

September 08, 2022

Michael, have a look at the 20 year comparison. XPJ absolutely slaughtered by the GFC

September 07, 2022

The world is a very different place than it was in the 80s and 90s. Back then mining stocks paid little if any dividends. The golden era for banks dividend growth driven by credit growth appears over. The geopolitical climate has created supply chain disruptions, rising inflation and commodity price growth which benefits resource companies. There is definitely some place in share portfolios for the better quality mining companies both for capital growth and dividends. Note that shareholders in MIN ( Mineral resources ) have earned over 25% annual average compound growth since the company listed almost 20 years ago, and BHP dividends over the past decade have more than paid for share purchase I made in 2005.

SMSF Trustee
September 07, 2022

Peter, how is that index funds will be doing that buying and selling? They don't trade the markets like that, they just hold what they have. So when resources run faster than industrials their holding as a % in resources will increase, yes. But not because they're buying at the top, they're just sitting on what the market is doing. If they get funds inflow then they will invest a little bit more in resources than they would have before the run up, but they're also buying industrials. It's not like they follow the momentum and only buy the better performing stocks at the time. That was an unwarranted throwaway line.

September 07, 2022

Correct, they only buy and sell when the index composition changes due to stocks entering or exiting or corporate events such as capital raising.

Geoff Burgess
September 07, 2022

Whilst a picture may be worth a thousand words, pictures can also be misleading. If the graphs had started in 2000 rather than 1979, the relativities might well be quite different. It all depends on the start date.

September 08, 2022

True. But how about if you started at 1980, 1981, 1982, 1983, 1984, 1985, 1986, 1987, 1988, 1989, 1990, 1991, 1992, 1993, 1994, 1995, 1996, 1997, 1998, 1999, 2001, 2002, 2003, 2004, 2005, 2006, 2007, 2008, 2009 and 2010?

I was looking on the chart for that point too, and found it.

Data like this always depends upon start and end dates and you can always pick a data set to suit whatever point you're making. Thornhill's reasons for starting at 1979 have been publicised before.

When working out my own investment strategy I ran modelling across different start and end dates as above, to see what happened. It's instructive.

Michael Toal
September 07, 2022

Fascinating short term information Peter


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