Betashares expands range of equity income solutions amid falling dividend yields and interest rates
Alex Vynokur
Leading Australian financial services company, Betashares, today expanded its range of equity income investment solutions with the launch of the Betashares S&P Australian Shares High Yield ETF (ASX: HYLD), as well as revising the investment strategy and reducing the management fee for its global equity income ETF, now called the Betashares S&P Global High Dividend Aristocrats ETF (ASX: INCM).
HYLD offers exposure to a diversified share portfolio of 50 Australian companies that aims to provide higher income than the broad Australian sharemarket, while avoiding the shortcomings of traditional high-dividend strategies by seeking to screen out potential dividend traps. For income-oriented investors, HYLD provides monthly distributions and can be used as a core Australian shares allocation that has the potential to outperform the S&P/ASX 200 Index.
Separately, Betashares has also revised the investment strategy and decreased the management fee for its global dividend income ETF. The Betashares S&P Global High Dividend Aristocrats ETF (ASX: INCM) provides exposure to a portfolio of 100 to 200 global companies that have increased or maintained their dividends every year for at least the past ten years, while also screening for dividend sustainability, with income paid quarterly.
Australia boasts one of the highest yielding share markets in the world and dividends with attached franking credits are an important source of tax effective income for Australian investors
However, income-oriented investors, especially retirees, have seen traditional sources of income dry up in recent years. The dividend yield of the Australian sharemarket has been declining and there are further cuts predicted to the RBA cash rate over the remainder of the year. Aside from the Covid-19 dip, both the ASX dividend yield and RBA cash rate have now fallen below 4% p.a. concurrently for the first time in 50 years. Historically, many self-funded retirees have relied heavily on dividends and term deposit interest to meet their income needs.
In this climate, many investors are seeking out ways to boost their exposure to companies with higher dividends – particularly in Australia, given our tax advantaged franking credits regime. At the same time, implementing an investment strategy based on selection of single stocks based on historical dividend yields can be risky – examples like Star Entertainment Group and LendLease demonstrate the importance of seeking to avoid dividend traps that can be detrimental to performance.
Betashares has a long track record of delivering intelligent investment solutions for investors who rely on investment income – including its well supported range of equity income, cash and fixed income ETFs. These funds have been strongly supported over the years, including by investors and asset allocators building income focussed portfolios for all stages of life.
Announcing the expansion of the equity income range, Betashares CEO, Mr Alex Vynokur, said “Australian investors are well known for their affinity for dividends. Both HYLD and INCM can be used as core equity allocations that can boost income, while also implementing dividend sustainability related screens,” Mr Vynokur said.
“Right now, the ASX dividend yield and RBA cash rate are both below 4%. Outside of the Covid dip, these are market conditions we have not seen at any other time in the last 50 years. This has serious implications for investors, particularly retirees, who rely on cash and shares for income. As a result, we’re expanding our range of intelligent investment exposures to help Australian investors generate more income,” Mr Vynokur concluded.
HYLD is now trading on the ASX and INCM’s strategy change will be implemented at the close of trading today. More information about HYLD and INCM can be found on the Betashares website.
