Invest
Continued LIC growth is unlikely
Listed investment companies have enjoyed a strong rate of growth in recent years, but one market research house believes this growth may be coming to an end.
Continued LIC growth is unlikely
Listed investment companies have enjoyed a strong rate of growth in recent years, but one market research house believes this growth may be coming to an end.
There has been a 98 per cent increase in LIC listings between June 2013 and March 2017, according to research house Zenith – but that growth is unlikely to be maintained.
In his review of the LIC sector, Zenith senior investment analyst Justin Tay said the growth and contraction in LIC listings is cyclical in nature and ultimately linked to stock market performance.
"Given this belief about the cyclicality of LIC listing growth, with investor and market sentiment key drivers, we expect that the current rate of growth in the sector is unlikely to be sustained over the medium to long-term," Mr Tay said.
There is also a relationship between market sentiment and whether LICs are trading at a discount or a premium to their net tangible assets (NTA), he said.
"When there is negative market sentiment, LICs generally trade at a discount. However, the research also revealed that regardless of the sentiment towards the sector, LICs had, on average, traded at a discount to NTA up until April 2013," Mr Tay said.
He put the phenomenon down to the rapid increase of SMSFs as well as amendments to the Corporations Act in 2010 that allowed dividends to be paid out based on a solvency test (rather than profitability).
"Although these factors are highly subjective, particularly with regards to fully franked sustainable dividends and high levels of shareholder engagement, we believe these factors are the key drivers to ensure that an LIC does not trade below its NTA," Mr Tay said.
Given the importance of dividends for LICs, cuts are "highly undesirable", he said.
"Zenith believes the dividend coverage ratio can be an indicator of a LIC’s dividend sustainability," Mr Tay said.
"Ideally, a LIC should have at least two years’ worth of profit reserves to maintain current dividend payments in the event there is a downturn in the LIC’s profitability."
RELATED ARTICLES
-
Trust, technology and triage: what NSW’s ‘name and shame’ signals for real estate governance
-
Vacancy is rising, demand is resilient: A case study in defending yield as Australia’s rental cycle rebalances
-
Don’t lose the deposit: A case study in stopping real estate payment fraud — and the ROI for doing it
Property
Trust, technology and triage: what NSW’s ‘name and shame’ signals for real estate governance
NSW’s latest enforcement action on real estate trust accounts isn’t a one-off embarrassment; it’s a stress test of sector governance. With licences suspended and penalties applied, the message is ...Read more
Property
Vacancy is rising, demand is resilient: A case study in defending yield as Australia’s rental cycle rebalances
After a blistering run, Australia’s rental market is loosening at the edges. Vacancy is edging up off historic lows, rent inflation is set to moderate into 2026, yet underlying demand remains ...Read more
Property
Don’t lose the deposit: A case study in stopping real estate payment fraud — and the ROI for doing it
Deposit redirection scams are quietly eroding buyer savings and agency reputations in Australia’s property market. This case study unpacks how a mid-tier real estate group redesigned its settlement ...Read more
Property
The $12m threshold: Why portfolio value, not property count, now defines Australia’s investor elite
The old yardstick of six properties as shorthand for investment success has been overtaken by a harsher reality: in today’s market, elite status is defined by balance-sheet strength, not asset countRead more
Property
From intuition to instrumentation: How a "two-stakeholder" sales playbook lifted close rates and cut cycle times
High-stakes consumer purchases are increasingly joint decisions. When one partner is under-served, deals stall. This case study follows an Australian real estate group that rebuilt its sales motion ...Read more
Property
Selling in 2025: How to spot bad agents fast—and build an ROI-first vendor playbook
In Australia’s property market, choosing the wrong listing agent isn’t just inconvenient—it’s a textbook principal–agent failure that can wipe tens of thousands off your sale outcomeRead more
Property
Selling in 2026: How to de‑risk your agent choice and protect tens of thousands at settlement
Choosing the wrong selling agent isn’t just an inconvenience — it’s a balance‑sheet risk. In a market where digital discovery is concentrated and AI is recasting how listings are priced and promoted, ...Read more
Property
Rate resilience in Australian housing: why scarce supply is overpowering monetary tightening
Australia’s housing market is defying higher borrowing costs because the binding constraint isn’t demand—it’s supply. Brokers report persistent buyer competition and investor repositioning, while ...Read more
Property
Trust, technology and triage: what NSW’s ‘name and shame’ signals for real estate governance
NSW’s latest enforcement action on real estate trust accounts isn’t a one-off embarrassment; it’s a stress test of sector governance. With licences suspended and penalties applied, the message is ...Read more
Property
Vacancy is rising, demand is resilient: A case study in defending yield as Australia’s rental cycle rebalances
After a blistering run, Australia’s rental market is loosening at the edges. Vacancy is edging up off historic lows, rent inflation is set to moderate into 2026, yet underlying demand remains ...Read more
Property
Don’t lose the deposit: A case study in stopping real estate payment fraud — and the ROI for doing it
Deposit redirection scams are quietly eroding buyer savings and agency reputations in Australia’s property market. This case study unpacks how a mid-tier real estate group redesigned its settlement ...Read more
Property
The $12m threshold: Why portfolio value, not property count, now defines Australia’s investor elite
The old yardstick of six properties as shorthand for investment success has been overtaken by a harsher reality: in today’s market, elite status is defined by balance-sheet strength, not asset countRead more
Property
From intuition to instrumentation: How a "two-stakeholder" sales playbook lifted close rates and cut cycle times
High-stakes consumer purchases are increasingly joint decisions. When one partner is under-served, deals stall. This case study follows an Australian real estate group that rebuilt its sales motion ...Read more
Property
Selling in 2025: How to spot bad agents fast—and build an ROI-first vendor playbook
In Australia’s property market, choosing the wrong listing agent isn’t just inconvenient—it’s a textbook principal–agent failure that can wipe tens of thousands off your sale outcomeRead more
Property
Selling in 2026: How to de‑risk your agent choice and protect tens of thousands at settlement
Choosing the wrong selling agent isn’t just an inconvenience — it’s a balance‑sheet risk. In a market where digital discovery is concentrated and AI is recasting how listings are priced and promoted, ...Read more
Property
Rate resilience in Australian housing: why scarce supply is overpowering monetary tightening
Australia’s housing market is defying higher borrowing costs because the binding constraint isn’t demand—it’s supply. Brokers report persistent buyer competition and investor repositioning, while ...Read more
