News & Insights

AFR: Dividend ‘bonanza’ could ease the pain of lower rates

Top income funds are yielding double-digit returns but the trick for investors is to identify companies and unit trusts with sustainable performance.


 

A “dividend bonanza” is delivering 12-month returns on Australian income funds of up to 20 per cent, offering a compelling alternative to bank accounts for yield-starved investors after the RBA’s 25 basis point interest rate cut on Tuesday.

Plato Investment Management managing director Don Hamson says falling cash rates mean returns on cash, term deposits and products linked to bank bill rates are likely to continue sliding.

Plato’s income fund is the top performer over three years with a return of 13.6 per cent, according to Mercer.  Plato has $5 billion under management.

“Retirees living off cash-linked income will struggle to make ends meet,” says Hamson. “It is very timely for retirees to consider their income-generating asset mix.

“Thankfully, retirees can continue to bank on receiving franking credits from Australian share investments.” (Labor, which lost the recent federal election, had threatened to abolished credits.)

Hamson says ALP’s threat to franking has caused some companies to “flush out excess franking credits” to the end of this financial year, providing Australian income investors – including retirees – with a record level of dividends, which might not continue.

Read the full article in the Australian Financial Review.