Because Australia has a standing as a high income and franking credit environment, we are often asked ‘Can you actually get income from global shares?’
And the simple answer is yes – but you’ve got to know where to look for it.
Three reasons to look to global shares for income
I think it is a really tough conversation to say to your clients, as a planner, ‘Look we want you to diversify, we want you to go global, but you’ve got to give up two thirds of your income…’
So I just want to spend a couple of minutes and go through three reasons why it doesn’t have to be that way. Why you can get income from global equity.
- The opportunity set is huge. In March, on average, there is over 100 stocks pay domestically, there’s 2,000 globally. Even in the worst month there are about 400 stocks that go ex-dividend in a global universe. So there is very definitely a huge opportunity set.
- There’s pockets of high income. The MSCI is low yield, but its predominately because the US is such a heavy weight and it’s a low income payer. If you look to countries like Spain, the UK, New Zealand, they’re paying four or five percent. And if you look underneath the index at the economies you can see that in the US, low yielding IT is 30% of the economy. In Spain, 25% is utilities which traditionally is actually a higher paying sector. So the opportunity set is huge.
- There’s a lot of high yield companies. There’s lots of examples globally from a large global miner like Anglo American to an Asian shipping company like SITC. They both yield over 9%. We’re definitely not saying these are all fantastic investments, but we’re just showing that there’s a huge opportunity set for an active manager to take advantage of.
So, can you actually get income from global shares?’ We say very definitely yes – but you need to know where to look and that lends itself to active management. And these reasons have been why we’ve been able to generate strong income after fees and taxes for clients of our Plato Global Shares Income Fund.
Investors should always consider risk and seek professional advice before making financial decisions.
This document is prepared by Plato Investment Management Limited ABN 77 120 730 136, AFSL 504616 (‘Plato’). Pinnacle Funds Services Limited ABN 29 082 494 362, AFSL 238371 (‘PFSL’) is the product issuer of the Plato Australian Shares Income Fund (‘the Fund’). The Product Disclosure Statement (‘PDS’) of the Fund is available at https://plato.com.au/. Any potential investor should consider the relevant PDS before deciding whether to acquire, or continue to hold units in, a fund.
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