Australia for income, but beware very high pay out ratios

Chief Investment Officer and founder of Aitken Investment Management
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I’ve long believed that the right equity strategy is “Australia for income, international for growth”. The “lost decade” in Australian equities confirms this view.

While it’s nice to see the ASX200 recapture the 6000-point level, it’s worth reminding ourselves the last time the Australian benchmark was here was February 2007. In that decade at the index level you have experienced no capital growth in Australian equities, but you did collect a cumulative 44% in dividend yield over that decade (plus franking). It really was a “growthless yield” decade in Australian equities and I broadly expect that to continue.

The last time the ASX200 broke through the 6,000 mark was in February 2007 and back then John Howard was Prime Minister, Barack Obama had just declared he would run for President and the first iPhone was yet to be released. Below is a snapshot of how the financial landscape has changed since then.

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