Best 3 stocks for dividends
- Thread starter Huzar1683
- Start date
Over 30 years of sharemarket investing I have found that buying high dividend yield Australian shares ETF's are the most easiest and effective way for me to go.
I invested across the whole sector in my time and find it time consuming and a little more risky than buying an ETF. Some people buy companies who promise a "new find" or a "new cancer cure" or some other blue sky thingamajig that actually returns ZERO. Then there are others that just buy the banks, retail grocery stores and other high yielding companies like Telstra. Sounds good yeah? No, it's not really.
You see when you put your hard earnt into just few good companies and one takes a major hit you will lose a lot of money. Let look a company that many Mum and Dad investors have. They were chasing dividends and Telstra was paying around 7% plus franking credits. It was all going well and then they made an announcement that they would cut dividends and the share price had crashed. In February 2015 Telstra shares were at their recent peak of $6.74, today Telstra shares are down to $3.70. It has nearly halved in price. Those people who bought at the top are looking at nearly 50% losses. Trying to pick your own doesn't always work.
So this is why I choose High Dividend Yield ETF's. I have one called Vanguard High Yield ETF, it's ticker is VHY. This ETF invests in several companies, at this present time there are around 38. That means you have around 38 high yielding companies working for you, not just 3, 5 or 10. If one company like Telstra was to halve in share price you will lose a lot less with an ETF than just holding Telstra alone. The way I look at it is like this, why would you invest all your money in 1 company and get 7% when you can invest in many and across a broad range and get 7% also? The later is less risk I think.
For these types of ETF's there is an internal management fee, in this case it is .25%. So lets look at this more closely, you pay an trained fund manager .25% to manage this ETF, he does the work. You do not pay directly extra for this, they pay themselves out of the fund. All you have to do is pick your buys and sell times.
When ever the market takes a hit, I load up a bit more on these ETF's. When they get ahead of themselves I sell some. It's not hard buying and selling these ETF's, it's just like buying ordinary shares.
Have a look at these different ETF's. VHY, SYI and RDV. There are others too. There is a lot more to this than just buying blindly, you need to read the product disclosures and try and make an informed decision. What I have written here is fairly basic and it is just my personal opinion, nothing more.
Everybody has a different opinion on investing in the sharemarket, mine is just one of them and I know it works for my wife and I. Good luck and happy investing, cheers.
I invested across the whole sector in my time and find it time consuming and a little more risky than buying an ETF. Some people buy companies who promise a "new find" or a "new cancer cure" or some other blue sky thingamajig that actually returns ZERO. Then there are others that just buy the banks, retail grocery stores and other high yielding companies like Telstra. Sounds good yeah? No, it's not really.
You see when you put your hard earnt into just few good companies and one takes a major hit you will lose a lot of money. Let look a company that many Mum and Dad investors have. They were chasing dividends and Telstra was paying around 7% plus franking credits. It was all going well and then they made an announcement that they would cut dividends and the share price had crashed. In February 2015 Telstra shares were at their recent peak of $6.74, today Telstra shares are down to $3.70. It has nearly halved in price. Those people who bought at the top are looking at nearly 50% losses. Trying to pick your own doesn't always work.
So this is why I choose High Dividend Yield ETF's. I have one called Vanguard High Yield ETF, it's ticker is VHY. This ETF invests in several companies, at this present time there are around 38. That means you have around 38 high yielding companies working for you, not just 3, 5 or 10. If one company like Telstra was to halve in share price you will lose a lot less with an ETF than just holding Telstra alone. The way I look at it is like this, why would you invest all your money in 1 company and get 7% when you can invest in many and across a broad range and get 7% also? The later is less risk I think.
For these types of ETF's there is an internal management fee, in this case it is .25%. So lets look at this more closely, you pay an trained fund manager .25% to manage this ETF, he does the work. You do not pay directly extra for this, they pay themselves out of the fund. All you have to do is pick your buys and sell times.
When ever the market takes a hit, I load up a bit more on these ETF's. When they get ahead of themselves I sell some. It's not hard buying and selling these ETF's, it's just like buying ordinary shares.
Have a look at these different ETF's. VHY, SYI and RDV. There are others too. There is a lot more to this than just buying blindly, you need to read the product disclosures and try and make an informed decision. What I have written here is fairly basic and it is just my personal opinion, nothing more.
Everybody has a different opinion on investing in the sharemarket, mine is just one of them and I know it works for my wife and I. Good luck and happy investing, cheers.
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SilverDJ
Well-Known Member
I was looking for one of these, thanks.
Warren Buffet recommends this too. He says don't bother trying to pick shares or pay someone to pick them for you, just invest in a low commission index or ETF like this.
BTW, how does this one work exactly. Does it pay an actual regular dividend?, and is that cash or share re-investment?
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How often does the % of companies and the companies themselves change within the ETF? I was listening to Peter Schiff kvetching about one of his clients leaving for an ETF based fund manager and he was saying that for the most part they aren't managed at all. The clients are offloaded into the ETF's and they just sit back and collect the management fees for doing squat.
Pity they all started around 2010/11 would be nice to see how they would've weathered the 2007 crisis.
Looks interesting though I admit. VHY:
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^^Each ETF is different. Some are resources ETF's, some Bank ETF's, some High dividend ETF's etc. and then there are some that just track the market.
Each ETF has a different set of rules that the manager must follow. Some re balance every 6 Months and others every 12 Months. Sometimes a one off decision is made on failed stock. One time I got an email from a fund Manager saying something along the lines of "Due to the recent announcement of *** company the Fund Manager has decided it no longer fitted within the rules of this ETF and has therefore removed *** from the fund." So yes it does get monitored regularly. You need to read the relevant ETF PDS for more information on the fund you are looking at.
Some regular managed funds do the same also but charge 4 times the fees. Fess are very important. No matter where you invest, whether it is in your super, ETF's or a regular Managed Fund, they all charge you fees.
Just looking at that line up in the top ten just above. I like most of those stocks too. Sure Telstra has taken a pummeling lately but generally it is a good mix. Paying 1 brokerage fee versus doing it on your own and paying 10 is appealing to me.
*Note, I am an investor in VHY* I am just adding general information and an opinion, nothing more.
Each ETF has a different set of rules that the manager must follow. Some re balance every 6 Months and others every 12 Months. Sometimes a one off decision is made on failed stock. One time I got an email from a fund Manager saying something along the lines of "Due to the recent announcement of *** company the Fund Manager has decided it no longer fitted within the rules of this ETF and has therefore removed *** from the fund." So yes it does get monitored regularly. You need to read the relevant ETF PDS for more information on the fund you are looking at.
Some regular managed funds do the same also but charge 4 times the fees. Fess are very important. No matter where you invest, whether it is in your super, ETF's or a regular Managed Fund, they all charge you fees.
Just looking at that line up in the top ten just above. I like most of those stocks too. Sure Telstra has taken a pummeling lately but generally it is a good mix. Paying 1 brokerage fee versus doing it on your own and paying 10 is appealing to me.
*Note, I am an investor in VHY* I am just adding general information and an opinion, nothing more.
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I am sorry, somehow I missed this question. Yes they pay a distribution every 3 Months.
The way it works is that throughout the year all of the companies the ETF holds pay dividends at different times. It gets pooled in the ETF and then when the 3 Monthly distribution comes around the money within the pool (less fees) gets distributed in cash to the ETF holders.
VHY is in my Super. It goes ex distribution within the next week or so. About 2 weeks later the distribution arrives in cash into my Super account.
Sometimes when the markets are down (like now) I tend to top up my holdings just before it goes ex distribution. I know it is around the end of September for this quarter. I have bought 2 parcels of stock in the last 2 weeks because the market (and ETF) is down and because the distribution is coming.
To get and idea when a distribution is due, go to your online brokers site. Go to price "quotes" type in the company code and then click announcements. Announcements go back for 2 years. It gives you an idea of when and how much they might be likely to pay. At the moment the exact dates for VHY are not posted. This week it should come up. The ex distribution date is date you WILL NOT get the distribution, that is until the next quarter comes around. Make sure you know when that date is, cheers.
Oh that's interesting, I figured it would've just grown the fund itself. Well that fund is doing pretty well then over the past 12months to 5 years.
1/3/5 years on the right side there.
Thanks for the info on these, I haven't known a lot about ETF's and this was enlightening.
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^^^The distribution came into my Super Fund 3 days ago, you must have yours by now too, cheers.
I have Cadence Capital CDM.Ax for the last 3 years. Picked it up from Eureka Report recommendation.
SilverDJ
Well-Known Member
Yep, got mine, 1.11%. Not sure if that's weighted for the length I've had them? As I haven't had them for the full quarter.
I did fill in the dividend reinvestment form last week though, so next time I should get the shares.
Hey DJ, no it not weighted for the length of time. For example, if you bought that ETF the day before ex-dividend date or 2 Months prior to the ex-dividend date you would get paid the same. That's pretty much the same with all stocks.
You are probably thinking that it is a lousy return but let me remind you that it was the return for 1 quarter and that each quarters return is different. Sometimes it's more and sometimes it's less. Another thing to remember is that you get "franking credits" with every payment. That amount is like the tax paid amount. It is better that I direct you to this site for a better understanding of the importance of franking credits, link here: http://frankingcredits.com.au/
Because my super fund is in pension mode, all those franking credits come back to me as a full $ payment. There is no tax on income within your super fund when it is in pension phase. If you are in the workforce then basically it counts towards your annual salary and unless you are earning more than 87k a year it's pretty much a tax paid investment (give or take 5%).
References here for current tax rates individual: https://www.ato.gov.au/rates/individual-income-tax-rates/
For Companies: https://www.ato.gov.au/Rates/Company-tax/
So when you think about cash in a TD or Super Fund earning around 2% versus 5% to 7% in a High Dividend Yield ETF, it's not a bad investment. Just remember if the All Ords crashes then so will the ETF..........that's the unfortunate flipside.
I think about the markets a lot of the time. We all want profits and money. Right now the DOW is at all time highs, our all ords still has not recovered from the GFC. Looks good for us? Maybe, but if the DOW collapses then we will too, nothing is without it's risks, cheers.
You are probably thinking that it is a lousy return but let me remind you that it was the return for 1 quarter and that each quarters return is different. Sometimes it's more and sometimes it's less. Another thing to remember is that you get "franking credits" with every payment. That amount is like the tax paid amount. It is better that I direct you to this site for a better understanding of the importance of franking credits, link here: http://frankingcredits.com.au/
Because my super fund is in pension mode, all those franking credits come back to me as a full $ payment. There is no tax on income within your super fund when it is in pension phase. If you are in the workforce then basically it counts towards your annual salary and unless you are earning more than 87k a year it's pretty much a tax paid investment (give or take 5%).
References here for current tax rates individual: https://www.ato.gov.au/rates/individual-income-tax-rates/
For Companies: https://www.ato.gov.au/Rates/Company-tax/
So when you think about cash in a TD or Super Fund earning around 2% versus 5% to 7% in a High Dividend Yield ETF, it's not a bad investment. Just remember if the All Ords crashes then so will the ETF..........that's the unfortunate flipside.
I think about the markets a lot of the time. We all want profits and money. Right now the DOW is at all time highs, our all ords still has not recovered from the GFC. Looks good for us? Maybe, but if the DOW collapses then we will too, nothing is without it's risks, cheers.
SilverDJ
Well-Known Member
Yep, I know about franking credits.
I was happy with the first return I got, for a long term holding it's going to be a good option.
If the market drops then it's simply a buying opportunity IMO. My SMSF shares are most certainly a longer set and forget type thing than my personal shares.
I was happy with the first return I got, for a long term holding it's going to be a good option.
If the market drops then it's simply a buying opportunity IMO. My SMSF shares are most certainly a longer set and forget type thing than my personal shares.
Mine is down too SilverDJ but there more to that.
Firstly I see that you bought way back in Sept 2017 or before. So in that period of time you have collected at least 3 quarters of distributions with the last lot coming in the next few days at a rate of .9785c per share so you have collected some nice income over that period. Not only that, the price tanks heavily straight after it goes ex dividend, that has happened in the last few days too. Everyone wants the distributions but a lot people are only gambling and dump it as soon as it goes ex dividend.
The ETF also tends to mirror the ASX top 200 as well and that index has dropped around 6% too. If the Aussie market dives so will any ETF invested in the Aussie market, so it is expected. Just like any rises will raise the price of VHY too. Considering you have picked up 3 quarters of distributions you haven't come off too badly. Of course if you can not handle the 10% losses or gains or even more that could occur then you could cash out and invest in cash at 2%. That is the options well all face. I am still invested but I have cash reserves waiting to be deployed should the market crash a bit more. It's never easy allocating capital. Anyhow here is a chart to show the XJO over that last year, just to show that markets in general have fallen by 6% too, cheers.
Firstly I see that you bought way back in Sept 2017 or before. So in that period of time you have collected at least 3 quarters of distributions with the last lot coming in the next few days at a rate of .9785c per share so you have collected some nice income over that period. Not only that, the price tanks heavily straight after it goes ex dividend, that has happened in the last few days too. Everyone wants the distributions but a lot people are only gambling and dump it as soon as it goes ex dividend.
The ETF also tends to mirror the ASX top 200 as well and that index has dropped around 6% too. If the Aussie market dives so will any ETF invested in the Aussie market, so it is expected. Just like any rises will raise the price of VHY too. Considering you have picked up 3 quarters of distributions you haven't come off too badly. Of course if you can not handle the 10% losses or gains or even more that could occur then you could cash out and invest in cash at 2%. That is the options well all face. I am still invested but I have cash reserves waiting to be deployed should the market crash a bit more. It's never easy allocating capital. Anyhow here is a chart to show the XJO over that last year, just to show that markets in general have fallen by 6% too, cheers.