With no end to the low-interest-rate environment in sight – and the likelihood rising of the Reserve Bank of Australia (RBA) actually cutting the official cash rate even further – investors continue to look to the share market for yield.
There are several aspects of this strategy that make it one that must be constantly monitored. First, a stock market dividend yield cannot be considered as certain, because the dividend amount is at the discretion of the company, every reporting period. Two, the risk of share-price capital-loss, while holding shares for yield, is always present.
More recently, a third caveat has emerged: there are very real fears that dividend yields may fall victim, after this year’s federal election, to Labor’s proposed changes to the imputation credits policy.