Invest
Where income-seeking investors should put their money
Investors have been warned again to look for long-term growth and not chase yields from reporting season in a low-yield environment.
Where income-seeking investors should put their money
Investors have been warned again to look for long-term growth and not chase yields from reporting season in a low-yield environment.
In conversation with Nest Egg, Ausbil’s active dividend income fund portfolio manager, Michael Price, discussed the current and available options for investments.
Mr Price said that in the current state of affairs, “what’s really important is finding companies that can maintain and grow their dividends over time rather than companies that are going to find high dividends and then cut them”.
Where can investors focus?
Despite earnings and companies’ outlooks being weak, Mr Price said a key feature of the current reporting season was the existence of stronger dividend yields.
While the portfolio manager highlighted the importance of not chasing one-off yields, he did consider some of the better valued companies as being “ASX, Horizon, Coles, Suncorp, Tab Corp and Wesfarmers”.
According to the portfolio manager, all of these companies can continue to pay strong dividends.
The healthcare sector is another area Mr Price is fond of, and while they are not paying good dividends now, they offer “very good growth”.
“As a sector, I think it was the strongest-performing sector,” he added.
What should investors avoid?
Mr Price emphasised that the long-term price of a share comes from company earnings and how this figure changes, rather than P/E multiple changes.
“What you want to avoid is companies not growing their earnings and are likely to disappoint the market,” Mr Price explained.
He went on to warn investors that the banks could be under sustained pressure over the next few years and that investors should also avoid cyclical companies.
Economic slowdown won’t affect dividend yields
Regardless of economic conditions, Mr Price made an argument as to why equity markets will continue to grow, although this may occur in one of two ways.
Slow growth
“In the case where the bond market is right, meaning growth is low and interest rates are staying where they are or going lower, equity dividend yield is extremely attractive,” the manager said.
“While some people will tell you that the equity market has never been more expensive, relative to bonds it’s actually one of its cheapest periods.”
“In a low-growth environment, equity and equity income is attractive and equity markets have a fair bit of upside,” Mr Price said.
Strong growth
While investors seeking an income will have to adjust their portfolios, a period of sustained market growth will also help the equity markets in Mr Price’s perspective.
“If growth returns, you get a higher proportion of returns in growth rather than income, but I don’t think many people would see a strong recovery as a terrible thing for the equity market,” Mr Price concluded.
RELATED ARTICLES
About the author
About the author
Shares
DREST gears up for innovation with the appointment of new co-CEO and CTO
Luxury fashion and lifestyle mobile game DREST has announced significant leadership changes as it prepares for an exciting phase of development and expansion. Read more
Shares
Hope for investors scared by share and crypto crashes
As share markets and cryptocurrency take a beating following the tightening of monetary policy across the world, investors are contemplating their next move. Read more
Shares
Cannon-Brookes tries to block AGL demerger
Mike Cannon-Brookes is not giving up on AGL after the latter announced 15 June as the date of the demerger vote. Read more
Shares
Qantas set to acquire Alliance Aviation
The two airlines have entered into a scheme implementation deed. Read more
Shares
Bond and share investors may shrug off RBA’s rate hike
As mortgage holders reel from the prospect of having to reach deeper into their hip pockets to make bigger repayments following the Reserve Bank of Australia’s (RBA) interest rate hike from 0Read more
Shares
How to buy Shares: A beginner’s guide in 2022
So you want to get in on the stock market action? Congratulations, that’s an exciting step! But first, there are a few things you should know before you buy your first shares. Read more
Shares
Elon Musk chokes up on bid to swallow Twitter
The battle of the bird has intensified over the last week, as Tesla and SpaceX founder Elon Musk has ramped up his aggressive campaign to buy the entirety of social media giant, Twitter. Read more
Shares
How to Make Money in Short Selling
What is short selling? There is a common practice for people who actively trade in the stock market, which is to “buy low and sell high”, but what if you can still make money by doing the opposite? Read more
Shares
DREST gears up for innovation with the appointment of new co-CEO and CTO
Luxury fashion and lifestyle mobile game DREST has announced significant leadership changes as it prepares for an exciting phase of development and expansion. Read more
Shares
Hope for investors scared by share and crypto crashes
As share markets and cryptocurrency take a beating following the tightening of monetary policy across the world, investors are contemplating their next move. Read more
Shares
Cannon-Brookes tries to block AGL demerger
Mike Cannon-Brookes is not giving up on AGL after the latter announced 15 June as the date of the demerger vote. Read more
Shares
Qantas set to acquire Alliance Aviation
The two airlines have entered into a scheme implementation deed. Read more
Shares
Bond and share investors may shrug off RBA’s rate hike
As mortgage holders reel from the prospect of having to reach deeper into their hip pockets to make bigger repayments following the Reserve Bank of Australia’s (RBA) interest rate hike from 0Read more
Shares
How to buy Shares: A beginner’s guide in 2022
So you want to get in on the stock market action? Congratulations, that’s an exciting step! But first, there are a few things you should know before you buy your first shares. Read more
Shares
Elon Musk chokes up on bid to swallow Twitter
The battle of the bird has intensified over the last week, as Tesla and SpaceX founder Elon Musk has ramped up his aggressive campaign to buy the entirety of social media giant, Twitter. Read more
Shares
How to Make Money in Short Selling
What is short selling? There is a common practice for people who actively trade in the stock market, which is to “buy low and sell high”, but what if you can still make money by doing the opposite? Read more
