Australian banks' dividend payout 'increasingly unsustainable'

Analysts recommend cutting dividends to preserve cash.

Australian banks continue to pay out generous dividends, despite slowing profitability and increasing capital requirements, and analysts at BMI Research believe that this is increasingly unsustainable.

"Indeed, the dividend payout ratio of the S&P/ASX Banks Index continues to trend higher, coming in at 102.3% in December 2016, which exceeded the high of 101.0% in June 2010. In light of the challenging operating environment, banks could preserve cash by cutting dividends, and this would lead to a decline in their share prices as it signals the prospects of these banks are worsening."