Damien McIntyre
Sticky inflation has seen the real returns from cash based investment sitting in negative territory – prompting many investors to look further afield. And while Australian investors love their income producing blue-chip shares, there is much more on offer than local equities with a growing number of global stocks presenting opportunities for income and growth, according to Damien McIntyre, chief executive officer of fund manager GSFM.
McIntyre says millions of Australians are expected to retire in coming years.
“Projections suggest a potential doubling of retirements to around 300,000 a year as Baby Boomers move into retirement, and this doesn’t include the older Gen X cohort with more than 700,000 planning to retire in the next five years.
“Persistent inflation is impacting investment decisions as retirees, and pre-retirees, want to ensure their capital doesn’t lose value over time.
“With life expectancy rising, these retirees, especially self-funded retirees, require not only income but also capital growth.
“Allocating investment capital to global equities for income provides a powerful combination of portfolio diversification, long-term capital appreciation and potentially consistent yield.
“By looking beyond the Australian market, investors can access a vast spectrum of high-quality income opportunities and sectors that are often underrepresented in the domestic market. Investing globally for dividends can build more resilient and growth-oriented income streams and portfolios,” he says.
“The benefits are many. By investing in global equities, investors can spread their capital across different geographical regions and sectors. This diversification helps reduce the risk associated with a downturn in any one country or industry,” he says.
“Notably, this can reduce the concentration risk from investing in Australian equities. The Australian share market is heavily concentrated in banks and the big miners. Global markets provide exposure to dividend-paying companies, large and small, in sectors such as technology, healthcare and consumer staples, which are far less common in Australia,” McIntyre says.
“In the US, for example, many listed companies are known as ‘dividend aristocrats’, that is, companies that have increased their dividend payouts every year for 25 consecutive years or more. This offers investors stability and income, which is especially important for retirees.
“Having strong free cash flow allows companies to simultaneously reward shareholders with dividends while driving the growth that increases share value. In many cases, high-quality dividend payers demonstrate a financial discipline that frequently correlates with superior capital growth.”
McIntyre says most investors aim to grow their wealth while avoiding significant losses.
“Equities have a long-standing track record as the most effective vehicle for this growth. Investors profit from equities in two ways: through rising share prices and regular dividend payments.
History shows that earnings and dividends – two key components of investor returns – are the key drivers for share price valuation.
McIntyre points to the rolling 10 year returns from the S&P 500 Index going back to the 1930s.
“Dividends have consistently been a positive contributor in every 10-year time period, and earnings have contributed positively in all but five of the 87 rolling 10-year periods,” he says.
According to McIntyre, as global markets transition into disparate cycles of monetary policy in 2026, corporate fundamentals remain remarkably robust.
“Resilient consumer demand and disciplined cost management have bolstered free cash flow, providing a solid foundation for enhanced shareholder returns. A defining characteristic in the US has been the broadening of the income set; traditional ‘growth’ sectors, most notably the technology giants, have matured into reliable dividend payers, offering investors a combination of structural growth and tangible yield.
“Significant scale and consistent free cash flow have allowed for a shift in capital to investors. By initiating dividends, these companies are signalling financial maturity and a commitment to shareholder discipline, becoming attractive to investors who previously looked to more defensive sectors for income. This evolution has expanded the opportunity set for global income portfolios, allowing investors to capture technological upside without sacrificing regular cash distributions.
“More broadly, many large multinational companies, especially in sectors like utilities, healthcare and consumer goods, have consistent dividend policies. This regular income stream is especially attractive for income-focused investors and can boost returns from equities overall.
“Investors should look for strategies that focus on shareholder yield. These strategies can provide investors with the ability to not only generate income return in excess of term deposit rates and inflation, but also provide that capital uplift ensuring every dollar invested is working hard.
McIntyre says it is particularly important for investors to realise that investments in cash and bonds are being left behind from a real returns stand point.
“It’s just not the cash yield that leaves investors left behind, it’s the capital value of those investments as well,” he says.
“In today’s world “growth” doesn’t just mean higher GDP, it means growth in inflation as well – and when inflation rises, as it is now, it erodes the capital value of a bond.
“Bonds certainly can’t hedge out the negatives associated with rising inflation. Only equities can hedge out inflation – because in many cases the higher costs listed companies incur can be passed on to end consumers, minimising the risk of reduced returns.”