Mark knight

Ausbil has announced the launch of its first active exchange-traded fund (Active ETF), giving investors and advisers dual access to its Active Dividend Income strategy.

The Ausbil Active Dividend Income Fund – Active ETF (ASX ticker: DIVI), launched in 2018, is now admitted for trading on the ASX. It has A$967 million of funds under management as of 31 August 2025.

DIVI, an actively managed ETF, holds between 25 and 50 listed companies which Ausbil believes support consistent dividends and franking credits for investors that grow with inflation over time. It provides regular monthly income drawn from dividends of Australian companies, whilst aiming to protect investors’ capital against inflation.

“We are excited to officially launch the Ausbil Active Dividend Income Fund as an Active ETF on the ASX,” said Mark Knight, Chief Executive Officer of Ausbil.

“This milestone marks a significant step in making our income-focused strategies more accessible to more investors. By offering an Active ETF, we’re meeting the requests of brokers, financial advisers, SMSFs and mum and dad investors for a more convenient and efficient way to generate regular monthly income from equities, with the potential for additional capital growth.”

Michael Price, Portfolio Manager of DIVI, said the Fund’s listing on the ASX offers a competitive advantage through its active approach to stock selection. “Ausbil’s active management, a rigorous top-down macro and bottom-up fundamental process, and dynamic portfolio positioning provides investors with a solution focused on delivering sustainable monthly income with the benefit of franking credits,” he said.

Since inception, (30 June 2018), DIVI has generated 9.18% pa (net of fees) in returns, delivering consistent income and capital growth versus the benchmark return of 9.38% pa, as measured by the S&P/ASX 200 Accumulation Index, ending 31 August 2025. For a full table of returns net of fees, visit www.ausbil.com. au/divi.

DIVI focuses on providing high levels of dividend income and franking credits, aiming to deliver a monthly income stream in excess of the benchmark, that is able to grow with inflation over time.

“With a handful of large banks and resource companies paying the majority of dividends each year, relying solely on these sectors can expose investors to risk if dividends are cut. DIVI’s active management approach allows us to diversify beyond the biggest payers, targeting high-quality companies with sustainable dividend growth,” says Price, “and offers the resilience to maintain income through changing market conditions. This ensures our investors are well-placed to be exposed to quality income opportunities in any market environment.”

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Michael Price

Share dividends are recovering strongly from pandemic lows, with the potential for further “upside surprise” in certain sectors and stocks, according to Ausbil Investment Management.

Michael Price, Portfolio Manager for the Ausbil Active Dividend Income Fund, said today: “The outlook for dividends is now showing a rebound towards previous levels, which we know will be welcome news to investors in a low-income environment.

“Looking forward, we expect equities to deliver attractive dividends, with yields outstripping those from alternative income sources,” he said.

All four major banks, which are among the most sought-after stocks for dividend investors, were forced to cut or suspend dividends in 2020. “With growth in deposits, a buoyant mortgage lending market and strong balance sheets, we see further recovery in bank dividends occurring over the coming year, albeit with lower payout ratios than before the pandemic,” Mr Price said. Ausbil data shows that since April 2020, iron ore companies such as BHP, Rio Tinto and Fortescue overtook the banks to become the leading dividend payers in Australia, as shown below.

According to Australian Bureau of Statistics data, in 2020 iron ore brought in record annual export revenue of $116 billion, up 20.8% on the $96 billion earned in 2019, in a boom year for the resources sector<sup[1].

“Looking forward, we believe there is potential for upside surprise from both the banking and resources sectors, with plenty of valuable franking credits to be had for investors.

“However, an active approach remains important in order to identify those companies that can produce sustainable and growing dividend income,” Mr Price concluded.

——–

[1] ABS trade report, as at December 2020

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Michael Price

Income is traditionally associated with term deposits and fixed income among more defensive assets, and with real estate and the traditional concept of high

dividend shares among growth assets. In the last 20-years, there has been a fundamental change in the relationship between dividend yields and the cash rate, a proxy for short-term deposit rates (as shown below). The secular fall in interest rates has seen them drop well below the relatively more consistent level of dividend yield.

This differential has become quite significant such that dividend yields currently stand at around 4.4% a year against a cash rate of 1.5% pa. For comparison, over the last 20 years the average equity dividend yield has been around 4.09% (with a standard deviation of 0.60%), compared to the average official cash rate of 4.14% (with a standard deviation of 1.65%). This suggests that over this period, dividend yields have been less dispersed than the cash rate. Or in other words, the relative long-term stability of diversified Australian dividend yields are less variable over time than income derived from assets relate to cash rates.

Drawing dividend income from an actively managed equity portfolio offers the benefits of both income and growth, but with broader diversification for stability and growth, and the potential for active approaches to enhance income.

Regular equity income can help with risks faced by retirees

Investors in the later stages of their accumulation phase, approaching retirement, and in retirement can benefit from the use of equities as part of their overall income plan. At this stage, investors face two major risks that impact how much they have to fund retirement, and how long this will last: longevity risk, and the risk of inflation over time.

In simple terms, longevity risk is the risk of outliving your money. Australian life expectancy has been steadily increasing. According to the ABS, Australian women have a life expectancy of 84.6 years of age (compared to just 50.8 years in 1890), Australian men a life expectancy of 80.5 years (compared to just 47.2 years in 1890). Just in the last 10-years, female life expectancy has risen by 1.5

years, and male by 0.9 years.1 Figure 3 illustrates the gains in life expectancy for men and women since 1890, illustrating a steady trend that is still rising. On reaching retirement at the age of 65, the likelihood of survival for Australian couples is high (where at least one is alive), with 90% expected to reach the age of 85, 50% to reach the age of 93, and 10% who will attain the age of 99 years.

With the population living longer, on average, to ages well in advance of the retirement age of 65-67 years, there is a commensurate increase in demand for income and growth. Older Australians need higher incomes to replace earnings forgone in retirement, a growing income stream to mitigate against rising living costs, income that will last with minimum capital drawdown, income that is reliable and regular, and income that makes the most of existing tax rules.

Essentially, investors increasingly need income to live off, without necessarily having to eat into capital. Equities are beneficial in the capital growth they can achieve over the long term, helping replenish capital for the much longer journey investors are experiencing in retirement.

A second risk investors should consider is the impact of inflation on the purchasing power of their money. Investment returns do not account for inflation. If you earn 10% from an investment, and inflation (the price of things) rises by 3%, then you actually only have 7% in real spending power (without accounting for any taxes for illustrative purposes).

Equities, being businesses, can typically adjust for inflation within their business models by changing their prices. Moreover, over the long term, equities typically provide a higher level of return that can help offset the long-term detrimental wealth impact of inflation.

Why does active dividend income investing work?

An active dividend investment approach can add value to a portfolio, and generate outperformance, through focusing on quality companies with strong dividends and dividend growth, companies with sustainable earnings growth, maximising the benefits available through the tax and imputation system, and tactical allocation to capture a greater share of dividend income.

Markets are efficient, but not perfect. The first and most fundamental reason that an active approach to income investing works is the fact that the market is relatively inefficient, particularly in the short term.

Chasing dividend yield, alone does not maximise returns

The assumption that many income investors make regarding dividend yields is that the relationship of current dividend yield to future earnings growth is linear, that is, the higher the dividend yield, the higher the future earnings growth from which dividends are paid. This assumption does not actually hold in the market.

On average, the top dividend yield companies actually see low, or even negative, earnings growth going forward compared to the 4th to 7^th decile of companies. This has been true for the last 20 years.

An active approach does more than simply chase yield, as would a passive approach to yield. An active dividend income strategy can increase income from companies whose dividends are healthy, but maybe not the highest, because they are also investing earnings into a growing business, hence their better earnings growth in the year ahead.

Also, the highest yielding stocks are more volatile. Top decile dividend yielding companies tend to show higher volatility in returns, on average. An active approach to dividend income investing can seek to reduce portfolio return volatility by not chasing yield for yield’s sake, but investing judiciously on the fundamental value of future sustainable earnings growth.

The top dividend paying securities may also not be value-for-risk. Another quirk of chasing the highest dividend yield companies is that they can be poor value for risk taken when compared to the market.

Lower decile stocks by dividend yield demonstrate a better performance for risk than for the top decile of dividend yield companies. The top two deciles for dividend yield show a relatively poor performance in terms of risk taken compared to lower decile companies.

High dividend payout ratios sometimes actually signal decline. Yet another quirk of the income investing market is that higher dividend companies may be value traps, especially if high payouts are indicative of a lack of equity investing opportunities within their own businesses. In short, when a company makes rational decisions about how to manage their business, they have two choices: reinvest earnings in the business in positive return projects if this meets or improves their current return on equity; or, if reinvesting in the business is equity diluting, they can elect to pay out earnings as normal or special dividends.

There is a third option, share buybacks, where a company purchases its own stock to reduce the number of shares in issue to improve future shareholder returns, but this is not really an investment in future earnings growth nor in improving the capacity of the actual business.

A classic example of a high dividend paying company compared to a company which has productive opportunities for reinvestment is the difference between Telstra and CSL. Telstra was long considered a key dividend paying stock for investors seeking income from equities. It was sold as such by the Federal Government when it was privatised to mum and dad investors. Over the years, the burden of being the largest telco, legacy systems and infrastructure, rapidly changing technology and limits to growth have seen Telstra lose its status as a key dividend stock. Telstra’s dividends have not grown over time. By contrast, CSL has steadily transformed itself from also being government owned, as the Commonwealth Serum Laboratories, into a global leader in biotechnology, largely by balancing the payment of dividends with significant reinvestment in the growth of its business and IP. CSL has a global contestable marketplace. As a result, CSL’s shares show a growing dividend over time.

Most companies maintain a balance between reinvesting and paying dividends. If high dividend yield companies are such because they lack productive projects in which to invest, in all likelihood they are disinvesting towards an ultimate decline in their business.

Astute active dividend income approaches can seek dividend yield while avoiding companies with no opportunity to reinvest earnings and improve return on equity. In other words, active approaches can avoid companies whose business models are in decline.

Moreover, an active dividend income approach can actively tilt exposures towards companies with both strong dividends, and value-adding opportunities, to expand their business by reinvesting some of their earnings into positive return projects. This can help improve the quality of dividends in a portfolio, and add growth in future dividend income. Actively tilting towards quality companies such as this can help reduce volatility in the overall portfolio.

Stocks tend to outperform around ex-dividend dates. After companies announce earnings, investors tend to bid-up stocks with an impending dividend payment. Once a stock goes ex-dividend (the date from which new owners are not eligible for the current dividend) the price should, theoretically, fall by the amount of the dividend. This is not always the case. Moreover, quality dividend stocks also tend to recover well, ex-dividend, on renewed demand from investors. This provides opportunities for active dividend income investors to take advantage of these inefficiencies around ex-dividend dates through tactically overweighting towards quality dividend paying companies.

Another misunderstanding about active dividend income strategies is assuming that they rely on franking credits and the imputation system. The dividend imputation system was introduced by the Hawke-Keating government in 1987 to solve for the double taxation of company profits where companies paid tax from earnings, and investors then paid tax on these net earnings.

The imputation system may be impacted by the outcome of the 2019 Federal election. However, it is important to note that franking credits are just part of an integrated active dividend income approach. Active dividend income investing can still outperform passive yield chasing without the existence of franking credits, and can also actively increase its exposure to tax effective dividend income beyond what is typically available in passive approaches.

Why the active dividend approach is relevant for investors

The dividend income market is transforming. Income investors like SMSFs, retirees, and investors approaching retirement can diversify away from traditional sources of income, like fixed income and term deposits, for a longer-term approach, diversified across high-quality Australian companies. They can do this in equities without sacrificing the potential for long-term growth.

An active approach to dividend income investing can outperform the market, and is superior to passive income investing approaches as it can actively avoid dividend traps, actively seek quality companies with stable and growing dividends, offer better risk-adjusted returns, make the most of tax effective franking, and deliver less volatility than the market itself.

Finally, the income and earnings quality focus of an active dividend income approach provides a more defensive equities option with regular income benefits that can help improve portfolio resilience and diversity.

By Michael Price, Portfolio Manager of the Ausbil Active Dividend Income Fund 

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Michael Price

Leading Australian investment house, Ausbil, has launched an Active Dividend Income Fund combining a core and tactical allocation approach to generating higher dividend income, paid to investors in monthly distributions.

“In this low rate environment, and with people living longer in retirement, investors need diversified and higher income sources, with the potential over the long term for capital to grow,” said Michael Price, Portfolio Manager.

The Ausbil Active Dividend Income Fund actively invests in Australian securities to generate dividend  income  through:

• sustainable earnings upgrades,
• cyclical opportunities,
• sentiment-driven mispricing,
• dividend imputation and franking credits, and
• tactically allocating to dividend paying securities.

The Fund invests primarily in S&P/ASX 200 companies which are expected to generate growing dividend streams supported by revenues, earnings and free cash flows.

“Strategies such as tactical allocation to dividend paying securities, and opportunistic investment in cases of temporary mispricing of yield, can generate additional active income,” Mr Price said.

“With an active dividend approach, we are able to generate monthly distributions rather than half-yearly,” he said. “This benefits investors seeking regular income who used to hesitate at the traditional half-yearly structure of distributions.”

“The dividend income market is transforming,” noted Mark Knight, Head of Distribution at Ausbil. “Income investors like SMSFs, retirees, and investors approaching retirement can diversify away from traditional sources of income like fixed income and term deposits for a longer-term approach diversified across high-quality Australian companies.”

The Fund is supported by an experienced investment team with a proven track record in active dividend investment, who combine company level research with top-down economic analysis and a disciplined approach to portfolio construction. Ausbil’s investment processes enables it to exploit inefficiencies across the market, at all stages of the cycle, and across all market conditions.

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Geoff Wells will take on responsibility  for managing the lower tracking error portfolios with exposure to the momentum and value styles as well as our proprietary Fundamentals at Risk (FaR)  analysis.  Mr Wells joins AMP Capital  from Macquarie Investment Management and brings with him more than 15 years’ experience managing similar products. He was previously Head of Australian Equities at GMO Australia. Peter Harris will take prime  responsibility for coverage of resource and resource-related sectors. Mr Harris’s previous roles include Chief  Economist at Shell Australia, Head of Resources Research at JCP Investment  Partners and sell-side Resources Analyst at CBA.

AMP Capital Global Equities and  Fixed Income Chief Investment Officer Mark Beardow said these appointments further bolster AMP Capital’s global equities business following the appointment of a new Global Head of Equities, David Allen, announced in  December 2015.

“I would like to welcome these  very strong investment professionals to AMP Capital. Both Geoff and Peter bring with them many  years of relevant experience and complementary investment styles to the  team.

“I am also very pleased that David Allen,  our new London-based Global Head of Equities, has now commenced his role in  March. Our global equities business is crucial in achieving our 2020 goal of becoming a pre-eminent global fund  manager, and is why we continue to invest in our fundamental equities  capability to deliver the best investment outcomes to clients,”Mr Beardow  added.

Both Mr Wells and Mr Harris commenced their new roles on Monday 4 April and report to Michael Price.

These new appointments bring the  consolidated team to 13 investment professionals, covering fundamental, systematic and ESG investing strategies. The single team structure captures the expanse  of specialised research and analysis conducted across the team, allowing all  AMP Capital’s equities strategies to benefit from the breadth of perspective within the team. This research forms the base of AMP Capital’s proven portfolio construction investment process which  aims to deliver an outstanding investment experience to clients.

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AMP announces its themes for 2014 for the Australian market.

As the country prepares to mark Australia Day, AMP Capital has identified the key themes investors in Aussie equities should celebrate and those they should look out for this year.

AMP Capital Co-Head of Fundamental Equities Michael Price said: “Australian equities are a key component of many investors’ portfolios and there are reasons for investors to be positive about the asset class this year. There are signs M&A activity is increasing in response to a rising market while housing construction is also recovering.

“On the flip side, investors should be aware mining capital expenditure is continuing to be rolled over and this may have an impact on the economy more broadly and companies that service major miners in particular. Australian retailers’ supply chain management will also be an issue to watch.

“Aussie equities are a popular investment because they offer the potential for capital growth and income, tax advantages such as franking credits and liquidity in a market most local investors understand and feel comfortable with. They are often the first choice for investors ready to return to financial markets at a time when share valuations are still reasonable.”

The key themes are:

The return of M&A activity

After three to four lean years, mergers and acquisitions (M&A) activity in Australia looks set to increase along with the local equity capital market (ECM). There is a healthy initial public offering pipeline in place for 2014 with signs suggesting the return of contestable M&A. Periods of rising M&A and ECM activity are typically associated with rising margins for those companies linked to such activity. With both rising revenues and improving margins, Australian companies linked to capital markets are set for a strong year in 2014.

Housing construction recovery

Interest rate cuts have taken longer than normal to trigger residential activity due to concerns among consumers around job security and a desire by households to pay down debt. But the pick-up in demand the Reserve Bank of Australia (RBA) has been looking for is finally occurring in a coordinated manner across Australia. House prices are rising, finance approvals are picking up and housing start numbers are at levels consistent with previous peaks. A significant increase in demand for products such as concrete, bricks, plasterboard, glass, steel and concrete roofing, combined with the high fixed-cost nature of building product manufacture, should ensure a housing construction recovery translates into a large leap in profit for most operators. An improving housing market should also support hardware and electronics retailers.

Retailers to face increased sourcing costs and scrutiny on supply chains

Australian retailers’ supply chain management and supplier factory standards will continue to be scrutinised this year and laggards might face brand damage. In addition to margin impact from potential weakness in the Aussie dollar, retailers’ margins could also be impacted by continued wage inflation in Asia, most notably in Bangladesh where minimum wage inflation has lagged China. Emerging sourcing locations, such as Cambodia, also pose brand and operating risks.

Australian mining capital expenditure to continue to roll over

Investors should be mindful of the decline of mining capital expenditure, which is likely to impact companies providing services to the major miners. Factors such as uncertain demand from China and a lower commodity price environment are resulting in project deferrals and cancellations, and the rolling over of mining capital expenditure. Current market forecasts for many of the companies providing services to the major miners, notably those exposed to iron ore mining capital expenditure, continue to look too high and further downgrades are expected during the next 12 months.

All eyes to China

AMP Capital’s view is that Chinese growth will be around 7.5 per cent this year but it is the composition of this growth that is of particular importance. For example, if investment as a percentage of GDP dropped from 50 per cent to 30 per cent it would have a much bigger impact on resources demand than a change in GDP growth from 8.0 per cent to 7.5 per cent. Demand for copper and steel are still high by traditional standards, driven by a similar set of end-use sectors: infrastructure, construction and manufacturing. However, investors shouldn’t necessarily expect more of the same in China. Credit growth has slowed considerably during the past two months and the government appears determined to tighten liquidity conditions this year and in particular the growth of the shadow banking sector. We should expect demand growth to weaken from credit intensive sectors later in the year especially sectors that are highly carbon intensive as environmental controls tighten.

LNG will be a focus

The most interesting development in the Australian energy markets will be the commencement of the huge Gladstone liquefied natural gas (LNG) projects. While this could be a boon to the Australian economy, there are a few things to consider. LNG from the east coast of Australia is sourced from coal seam gas, which carries higher operational costs and potentially lower profits meaning tax revenues from these projects may not be substantial for many years. Also, if the new volumes of LNG being sold were to buoy the terms of trade considerably as some expect, the Australian dollar could be more supported than the RBA would like, providing a conundrum for interest policy.

Executive remuneration and governance in the spotlight

A number of companies have received their first strike since the introduction of the ‘two strike’ rule and a continued focus on executive remuneration is likely in 2014. As a result, companies that continue to have remuneration structures poorly aligned with shareholders’ interest and/or poor disclosure on remuneration details as well as companies with poor overall governance structures might see significant ‘against’ votes in 2014.

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AMP Capital has recruited a number of leading investment professionals who will join the firm shortly. A new and stronger investment team will also allow AMP Capital to explore the launch of new Australian fundamental equity products to meet client demand, including concentrated, income and long/short strategies.

The new team, led by AMP Capital Head of Fundamental Equities Ella Brown, will involve merging the existing Sustainable and Capital equity teams. Existing AMP Capital investment professionals who will join the team are Jonas Palmqvist, Andrew Lally, Adrian Lemme, Carlos Castillo and Thomas Young.

Three senior external appointments have been made and an additional interim resource will also support the team. Gian Pandit and Michael Price will join as Senior Portfolio Managers, Phillip Hudak will join as Portfolio Manager/Analyst, and Ed Rayner will be seconded from AllianceBernstein for six months.

AMP Capital Chief Investment Officer David Kiddie said: “The experienced investment talent we have attracted combined with the newly integrated team ensures we are well placed to deliver contemporary investment strategies and outstanding investment outcomes to clients.

“Gian and Michael are highly regarded portfolio managers with proven performance track records while Phillip brings experience and expertise in the small/mid cap space,” Mr Kiddie said.

Gian Pandit will join AMP Capital in November 2011 from ING Investment Management. His focus will be developing AMP Capital’s capabilities in long/short and concentrated fundamental equities strategies. Mr Pandit most recently spent three years as Senior Portfolio Manager at ING Investment Management, where he successfully managed ING’s Select Leaders Trust, a concentrated portfolio. Mr Pandit also ran ING’s highly rated Extended Alpha Australian Share Fund, a 130/30 strategy. Prior to joining ING, he held positions as Fund Manager at both Consolidated Press Holdings and Boundary Capital and spent 12 years with Deutsche Bank in a range of investment roles.

In early 2012, Michael Price will assume responsibility for the AMP Capital Sustainable Share Fund and will develop an income-focused Australian equity strategy. Mr Price joins AMP Capital from ING Investment Management where he held a range of roles over 17 years. His responsibilities included portfolio management for the highly recommended ING Sustainable Investment Fund which he has managed since 2005, as well as the ING Imputation Fund. The sustainable fund managed by Mr Price was named Fund of the Year by Ethical Investor in 2009.

Phillip Hudak will join in early 2012 specialising in small/mid cap stocks. Mr Hudak has spent the last year with ING Investment Management in its small caps team. Prior to this, he spent three years with MIR Investment Management as an analyst and six years as an investment consultant with Russell Investment Group.

An additional interim resource will be added to support the team with Ed Rayner seconded from AllianceBernstein for six months. Mr Rayner will continue to manage AXA’s investments in the Australian Growth and Australian Industrials strategies. He brings 16 years of international investment experience gained at AllianceBernstein, UBS Brinson and JP Morgan Investment. Mr Rayner will collaborate with the AMP Capital Australian Fundamental Equities team on stock, sector and domestic equity market views.

AMP Capital’s Environmental, Social and Governance (ESG) Research team will continue to be led by Dr Ian Woods, and includes Mans Carlsson-Sweeny and Karin Halliday. The team will continue to provide research and insights to the AMP Capital Sustainable Share Fund. The team’s remit will also be expanded to ensure their well-regarded proprietary ESG research is applied more broadly across investment strategies. The team will report to Ella Brown.

As a result of these changes today Greg Barnes, Alvin Chan, Chu Kwa and David Berthon-Jones will leave the Capital team and Will Riggall will leave the Sustainable team.

“We remain committed to continally improving our value proposition for clients and ensuring our investment teams are best placed to deliver strong medium and long-term results. The new Australian Fundamental Equities team will help us deliver on this commitment and bring contemporary products and solutions to the market,” Mr Kiddie said.

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