News & Insights

The PL8 Entitlement Offer: A proven income strategy for retirees.

Making ends meet in retirement has, arguably, never been more difficult.

The RBA cash rate is at a record low of 1% and expected to go lower, whilst 10-year Commonwealth Government bonds are trading on a yield below 1%.

We’re living in an incredibly low yield environment, so considering the Australian All Ordinaries has averaged around 6% gross yield for the last 30 years, when one includes franking credits, it’s no surprise more and more retirees are looking to the share market for income.

Our Plato Income Maximiser (ASX:PL8) Entitlement Offer has been launched to meet this demand for income.

PL8 is the first and only Australian Listed Investment Company (LIC) paying monthly dividends. For the year to June 2019, PL8 paid 12 monthly ordinary dividends of 0.5c fully franked, as well as a 3c fully franked special dividend yield. This equated to a gross yield for the year of 11.7% including franking credits. It was a year in which we took full advantage of some extraordinary dividend distributions, but they weren’t in the usual places.

We capitalised on dividend increases and special dividend payments amongst Australian resource stocks, we moved into stocks that were flushing out of franking before the federal election (Flight Centre Group) and we took advantage of lucrative opportunities from share buy-back schemes.

As this ‘dividend bonanza’ has played out, many of Australia’s traditional large income stocks have been doing it tough.

The big-four banks are facing significant headwinds, while Telstra’s recent full year results confirmed the telco’s dividend is now 48% lower than it was two years ago. For a retiree without a diversified portfolio this could be devasting.

The ability to build a diversified portfolio of income stocks and actively pursue and move into income generating investments, at the right time, is what gives PL8 the edge when helping retirees make ends meet.

Looking forward there are more of these opportunities on the horizon that PL8 will take advantage of.

We expect to tender the entirety of our Qantas holdings, in order to fully capitalise on the airline’s off-market buy back, announced in its annual results last week.

For retirees and other tax-exempt Australian investors, when taking franking credits into account, the buy back would represent a premium of around 14% on the share price around the time of writing this article.

This is just one example of how we manage this strategy from a retiree’s taxation perspective with their income needs front of mind.

PL8 invests fully into the Plato Australian Shares Income Fund. Our strategy has an eight-year track record of investing strategically to benefit retirees.

The PL8 Entitlement Offer, which closes today, entitles existing PL8 shareholders (who were on the register on the record date of August 13) to one new share for every 1.6 existing shares held.  Existing shareholders may also apply for oversubscriptions.  Any shares not taken up by existing shareholders can be subscribed for by new shareholders via the Broker shortfall offer. The offer price for new and existing shareholders is $1.10.

Anyone who takes up the offer will be paid the 0.5c September dividend which has already been declared.

We use a capacity constrained strategy so this will likely be the last time PL8 shares are issued.

One of the biggest risks a retiree can take when investing in shares for income is relying on just one or two big-name traditional Australian income stocks. With PL8 we aim to reduce that risk with a diversified portfolio, while increasing yield and enabling monthly dividend payments.