Are you one of those investors who eagerly await the latest earnings season to check if your favourite companies are paying dividends? Well, brace yourself for some choppy waters, because recent reports from the Australian Securities Exchange (ASX) suggest that dividend payouts are becoming increasingly unpredictable.
Of the top 200 companies listed on the ASX, nearly 90% declared that they would be paying dividends to shareholders in the most recent half-year earnings period. While over 50% of these companies said they would be increasing their dividend per share payout, around 20% announced cuts.
Factors such as rising interest rates, inflation, and operational costs have all impacted dividend payouts, making them less reliable sources of steady income for many investors.
So, what can you do to mitigate this risk? One solution is to broaden your investment portfolio by using equity exchange traded funds (ETFs) and managed funds. These funds pool together investments from hundreds of companies, providing a more diversified stream of dividend income.
Not only do ETFs and managed funds provide more stable dividend income, but they also offer the option to reinvest dividends back into the fund to purchase additional units. This approach can help grow your portfolio over time.
But relying solely on dividends for income isn’t enough. It’s important to look beyond earnings season and take a broader, long-term approach that considers both income and capital growth. This is where a total-return strategy comes in.
Unlike an income-oriented strategy that solely relies on dividends to preserve capital, a total-return approach considers your overall investment returns and focuses on asset allocation to sustainably support your spending needs.
By diversifying your risk across different investments and countries, a total-return strategy can help smooth out income during volatile market periods. It also allows you to use money achieved from capital growth returns to offset any shortfall in income.
Interested in discussing your investment strategy? Contact us today to speak to one of our Financial Advisors regarding what is the best strategy for you.
GENERAL ADVICE AND PAST PERFORMANCE WARNING
This article has been prepared by United Global Capital Pty Ltd (ACN: 154 158 273, ABN: 25 154 158 273, AFSL: 496179).
This article contains general information only and is not intended to provide any person with financial advice. It does not take into account any person’s (or class of persons) investment objectives, financial situation or particular needs, and should not be used as the basis for making any investment or financial decisions. United Global Capital Pty Ltd does not make any representation as to the accuracy, completeness, relevance or suitability of the information, conclusions, recommendations or opinions contained in this article (including, but not limited to any forecasts made). No liability is accepted by United Global Capital Pty Ltd or its directors, officers, employees, agents or advisors for any such information, conclusions, recommendations or opinions to the fullest extent possible under applicable laws.
Anyone considering making any investment decisions based on the information contained in this presentation should note that past performance, target returns or estimates of returns is not a reliable indicator of future performance and actual results can vary significantly.