POWERED BY MOMENTUM MEDIA
Income strategies suit SMSF investors
An improvement in the fundamentals of listed Australian companies has led to dividends climbing back towards more normal levels, and improved the appeal of income strategies which could be particularly suitable for self managed super fund (SMSF) investors.
Australian shares have rebounded while dividends have increased for the first time in 12 months, which will put pressure on companies to pay out their cash reserves, meaning overall yields are competitive against term deposits and the appeal of income based strategies is increasing, according to Scott Bennett, portfolio manager at Russell Investments.
“We are seeing a turning point for dividends. As a result we expect a rise in income-based strategies as the market heads into a period of lower growth where a greater proportion of investors’ total returns could be driven by dividend income,” Bennett said.
Income strategies would be particularly useful for SMSF investors as they begin implementing their transition to retirement strategies, Bennett said.
SMSF investors should also consider share buybacks, which are set to increase as companies move away from conservative balance sheets, he said.
Excess cash can have a negative effect on a company’s return on capital, potentially increasing shareholder pressure on companies to put the cash to work through merger and acquisition activity, or return it to shareholders via a special dividend or buyback, Bennett said.
“Woolworths’ recent off-market buyback is an example of an attractive strategy for SMSFs, as the majority of the buyback price was treated as a fully-franked dividend, therefore allowing significant tax benefits for investors,” Bennett said.
Recommended for you
The impact of identity theft and its threat to superannuation savings were highlighted in a case that went before the Federal Court at the end of 2023.
A recent NSW Supreme Court decision is an important reminder that while super funds may be subject to restrictive superannuation and tax laws, in essence they are still a trust and subject to equitable and common law claims, says a legal expert.
New research from the University of Adelaide has found SMSFs outperformed APRA funds by more than 4 per cent in 2021–22.
The SMSF Association has made a number of policy recommendations for the superannuation sector in its pre-budget submission to the government.
TOP PERFORMING FUNDS
ACS FIXED INT - AUSTRALIA/GLOBAL BOND
Fund name
3y(%)pa
1
DomaCom DFS Mortgage
92.15 3 y p.a(%)
2
Global X 21Shares Bitcoin ETF
53.24 3 y p.a(%)
3
Global X GlobalX FANG+ ETF
43.15 3 y p.a(%)
4
DomaCom Shoreline North Coogee
36.26 3 y p.a(%)
5
GAM LSA Private Shares AU I
35.87 3 y p.a(%)
