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Suggestions for high yield, fully franked, low MER

Discussion in 'General Investing Discussion' started by Waimate01, 15th Sep, 2008.

  1. Waimate01

    Waimate01 Well-Known Member

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    Chaps,

    As the market slowly crumbles, I'd be very happy to increase exposure into it, but what I'd really like is to invest in the ASX200, but only those stocks within it that pay a fully franked dividend with a yield greater than (say) 4.5%.

    What I'd really like is to find an investment product that offers something like this, but at a really low MER and with a "buy and hold" approach so I don't get clobbered due to the churning of stocks. Oh, and without paying a premium above asset value.

    Effectively "selective indexing", if you like.

    Something like STW would be perfect, but instead of being across the whole ASX200, just across a subset of it based on fully franked yield.

    Does anyone know of an investment product which offers this sort of thing?

    Thanks

    -- Waimate01
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Have you looked at some of the Listed Investment Companies (LICs) on the ASX? There might be some which focus on franked yields (I haven't researched that specifically, so I can't suggest a particular company).

    I have no doubt we will see other low cost ETF products in the future based around strategies like you've described, but the ETF market in Australia is still very new.

    Vanguard have a managed fund that might suit you - I haven't researched it though, so can't comment on performance (I can't get data :( )

    Vanguard High Yield Australian Shares Fund | Fund profiles | Vanguard
     
  3. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Actually, I think I may have found what I'm looking for - I'll have to spend some time playing with it, but I'm hopeful I can get the data I need to be able to track Vanguard funds too!
     
  4. Denis

    Denis Well-Known Member

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    Well done Sim. We are very lucky to have someone of your knowledge and expertise guiding this forum
    Regards

    Denis
     
  5. Waimate01

    Waimate01 Well-Known Member

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    Thanks, Sim.

    It's certainly on the right track. But it's ASX200 minus real estate, so the #1 investment is .... BHP, which obviously drags its yield back a bunch. Surprisingly small fund size .. just $64m.
     
  6. lorrimer

    lorrimer Well-Known Member

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  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Fund is only 4 years old or so, and is also not likely to be favoured by planners given that there are no up-front fees or trailing commissions paid by Vanguard.
     
  8. Waimate01

    Waimate01 Well-Known Member

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    Thanks, Lorrimer. An interesting one for sure. Seems to churn rather a lot so not sure what that means for tax. Also a fair bit of gearing. Seems all rather clever to borrow money, rush in, grab the dividend and rush out. I guess I was hoping for something less clever ;)
     
  9. AsxBroker

    AsxBroker Well-Known Member

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    Hi Sim,

    I like the Vanguard funds, for client with a conservative investment mix his total ongoing fee was 0.72% pa on his total fum, including adviser fee, administration fee and of course the Vanguard MER compared to his previous super/pension fund which charged a flat 2.30% pa ongoing.
    After telling him he would only pay about a third of what he was then paying, he was ecstatic!

    It helps us beat industry funds in fees as well, eg, Hesta Pension is about 1% for balanced for our balanced client about 0.85% PA.

    Cheers,

    Dan
     
  10. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    So was this via a platform? ie. you got paid the trail from the platform rather than from the underlying funds?

    0.72% total fee is pretty good (unless the majority of the money was in index funds charging a lot less :p )

    I'm sure he was!
     
  11. JustB

    JustB Well-Known Member

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    Have you considered investing in direct shares with high yielding dividends?

    On current values/forecasts:

    MQG is paying 8.7% FF
    NAB is paying 8.6% FF
    ANZ is paying 8.1% FF
    WES is paying 7.1% FF
    TLS is paying 6.6% FF
    CBA is paying 6.4% FF
    WBC is paying 6.1% FF
    DJS is paying 6.1% FF
    QAN is paying 6.1% FF

    ...to name but a few.

    Sure, there is possibility that dividends may be reduced. However, there's also plenty of buffer above your stated 4.5% baseline. And yes, there's plenty of possibility of further downside in share price for some/all of these companies. However, there is diversity among sectors, and the risk of all of these companies turning to dust in the current turmoil is...well...up to the individual to assess :)

    With a bit of your own research I'm sure you can find a similar list of companies that you personally would feel comfortable investing in for the long term, and that will likely reward with steady income in the meantime.

    Happy investing :)
     
  12. Waimate01

    Waimate01 Well-Known Member

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    Good point, JustB.

    Indeed, I'm already about 40% invested in stocks such as those in which I've built up a position over some years. Some are underwater right now. A braver person would double-down in the dips, but I'm thinking a broader-based approach might be the thing, because it provides more insulation against individual aberrations.

    For just about every stock I hold or have thought about entering, I can think of more ways in which earnings can drop than ways in which they'll grow. Call it negative sentiment - coz it sure is ! Now I can understand that as a creature who evolved to run away from sabre tooth tigers and hunt small mammals, what I should be doing right now is overcoming my sentiment and going against my gut. And it seems to me that indexing is a good way to remove myself from the decision loop. It's just that I'm more interested in franked dividends than capital growth, hence the selectivity of the indexing.

    So I guess I could buy the high yielders from among the ASX20 and end up with 10 or so stocks that would encompass probably 50% by capitalisation of the top yielders from the ASX200, but given the blood which is flowing in the streets, I suspect owning another 100 or so stocks to pick up the other 50% of the ASX200 top-yielders would provide a useful "ballast" against the violent gusts of wind which are surely coming.