The report from Plato Investment Management said that while share prices fell over the past year, many investors were unaware that the total dividends increased almost 8 per cent in dollar terms from 2017.
Plato Investment Management’s managing director Dr Don Hamson said that the following year would likely produce even bigger hights.
“We think this financial year 2018/19 will see an even higher record yield of almost 14 per cent, given BHP is soon to pay a large special dividend and the potential for further buy-backs from the likes of Woolworths.”
Dr Hamson said that the past year had already been a record for the Plato Income fund income distributions.
“The income-focused fund ended the year with gross income distributions – cash plus franking credits after fees – in excess of 12 per cent.
“This was considerably higher than its pre-2018 average of 9 per cent gross income distributions.”
Dr Hamson said he expected high payouts of fully franked income due to the potential threat of Labor’s changes to franking credit refunds.
“To that end, we would encourage companies with excess franking account balances to consider increasing franked dividends or undertaking tax-effective buy-backs before the end of this financial year,” Dr Hamson said
Dr Hamson said investors needed to be cautious of the franking credit issue but not to stress about it and instead look for other avenues of revenue.
“Investors should be wary of this concentration as there are many other good companies that offer both consistent dividend income and better potential for capital growth in Australia and globally,” Dr Hamson said.
