The global search for yield has found its way to all corners of risk asset markets. Anything with a demonstrable short-term coupon has been ‘bid up in price/bid down in yield’, in line with record low cash rates and record low bond yields.
My strong belief is this has become somewhat dangerous. I am of the view that in many cyclical Australian equity sectors, the risk of substantial capital losses now far outweighs the attraction of “spot” dividend yields.
Buying cyclical equity sectors for “spot” dividend yield is the most potentially capital destroying combination.