While share market returns are likely to be relatively modest going forward, income will become a greater proportion of the overall return for investors, according to Russell Investments.
"It's highly unlikely that we're going to see the continued double-digit returns from equity markets that we saw from 2003 through to 2007," Russell Investments portfolio manager Scott Bennett told attendees at an investment lunch hosted by the financial services firm.
"What you're going to find is income, or dividends, is going to make up a much larger proportion of the overall return from equity investments, and we think that those investors that actually start focusing on that income component can be rewarded."
The massive paradigm shift of baby boomers transitioning to retirement was resulting in people looking for greater income as they retired, Bennett said.
"More importantly what we're finding, and this is the feedback we've got from our clients in particular, is that more than income, people want transparency and certainty in terms of the products they're buying.
"A lot of investors got burnt during 2007-08 through these highly engineered income strategies that were really just a whole lot of derivatives and didn't have any fundamental support for that income.
"So what people are really looking for is transparency and clarity in terms of the income of the product."
Perennial Value Management managing director John Murray added dividend growth had resumed post the global financial crisis, with an overall market dividend growth of 4 per cent for the 2010 financial year.
"One of the key things that came out of that [2010] reporting season did relate to dividends," Murray said.
"I feel quite confident that as the Australian economy continues to grow and profits continue to grow, dividends will continue to grow from here as well. One of the reasons for that relates to corporate gearing levels."
