FNArena’s Weekly Insights – May 18 2020

Dear time-poor investor: new research by Morgan Stanley has identified ASX sweet spots for dividend-oriented investors

In Search Of The Dividend Sweet Spot

By Rudi Filapek-Vandyck, Editor FNArena

This is the third, and final, instalment in a three parts series on dividends and investing in the Australian share market.

History shows dividends make up 50% of total return from equities, or more depending on how far we go back in time, but the subjugation of bond yields globally has made income-hungry investors increasingly dependent on dividends paid out by listed companies.

With many strategies centred around buying and holding high yielding stocks, the fall-out from the covid-19 pandemic for Australian investors is proving exceptionally damaging with high yielding share prices falling deeper and recovering less, only to be followed up with dividend cuts and deferrals, if not a fresh equity raising on top.

The first installment explains why your garden variety dividend/income strategy of only buying high yielding stocks with extra franking credits essentially amounts to high risk. Such portfolios have been hit the hardest in 2020.

Click to read the Full Report