Dividends vs growth in a fragile world

Australian investors have long loved dividends, and the local market is built for that, with banks and miners throwing off fully franked income. The AI boom and US tech rally have pushed “growth” back into the spotlight, but 2026 is shaping up as a more awkward trade‑off between the two.[3][2][1]

On one side sit the traditional income engines: major banks, large resources and listed infrastructure. In 2025, materials and utilities were among the best‑performing ASX sectors, while health care and information technology actually finished the year in the red. That meant many retirees who stuck with income names did fine without ever touching speculative AI stories. With official rates likely to ease slowly and term‑deposit rates already rolling over, the argument for franked dividends as a replacement “pay cheque” is still strong.[4][2][1]

On the other side are growth and thematic plays: local tech, AI infrastructure, specialist healthcare and global ETFs. Global healthcare, for example, started to outperform in late 2025 after trading at a steep discount to broader markets, attracting record ETF inflows as investors rotated away from pricey US tech. Locally, information technology was punished after a strong 2023–24, leaving a group of quality software and data‑centre names on more reasonable—though still not cheap—multiples.[5][6][3][2]

The bigger backdrop is that most strategists see only mid‑single‑digit returns from global equities over the next decade once inflation is stripped out. In that world, overpaying for the latest story stock is risky, but clinging only to high‑yield names that aren’t growing can be just as dangerous if inflation stays sticky.[7][8]

For many Australians, the answer in 2026 is likely a blended approach:

• use banks, resources and infrastructure for dependable, franked income;
• layer in selected growth—tech, healthcare, AI plays—where earnings and balance sheets justify it, not just the narrative.[5][2][1]

Put bluntly, dividends still matter, but they are not a free lunch. High yield with no growth is a warning sign, not a gift.

Sources
https://www.ig.com/au/news-and-trade-ideas/asx-200-market-outlook-2026-251209[2] https://www.fool.com.au/2025/12/31/best-and-worst-performing-asx-200-sectors-of-2025/[4] https://www.raskmedia.com.au/2025/12/16/which-asx-sectors-performed-best-in-2025/[3] https://www.livewiremarkets.com/wires/morgan-stanley-s-2026-outlook-on-the-asx-200-aussie-banks-and-rate-cuts[1] https://www.blackrock.com/au/insights/ishares/2026-comeback-year-for-healthcare[5] https://www.morganstanley.com/Themes/outlooks[7] https://www.livewiremarkets.com/wires/the-big-risks-investors-should-be-paying-attention-to-in-2026[8]

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