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.