Global stocks could offer better yields

In light of the Australian Labor Party’s (ALP’s) proposed changes to franking credits, investors may want to diversify their dividend income through global stocks, according to Plato Investment Management.

Analysis by the fund manager found that some global stocks were paying higher dividends than their Australian counterparts, suggesting that more investors should look to them for income.

Over 650 overseas companies were paying yields over four per cent a year in developed markets, including less known companies such as the Norwegian ship owner and oil service investor Ocean Yield, which yielded nine per cent.

With a survey by Plato last year finding that almost a third of investors seek dividend income of more than seven per cent from their portfolios, these overseas alternatives could prove both a strong income source and a means of diversification.

This would be particularly true for pension-phase investors, who represent a fifth of Australia’s $2.5 trillion superannuation industry, who rely on income generated from their portfolios.

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“Australian investors no longer have to rely on the locals, such as the big four banks and Telstra … There is no shortage of income on offer offshore, you just need to know where to look,” Plato senior portfolio manager, Daniel Pennell, said.

Local bonds, fixed income and term deposits did not offer the same income levels currently, he said.

“Rather, retirees should look further afield at other options, both here and overseas. This can be direct investments in companies that pay good, sustainable dividends or through specialist fund managers that do this,” Pennell suggested.