The income you can get by leaving money in the bank is pretty bad these days. It's crazy to think that with a million dollars in the bank the most you might be able to get is $30,000, with most accounts offering less of a return than that.
So, what should an income-seeking investor do?
I think Australian shares are the answer. Many experts agree that, on the income side of things, Australia investments are hard to match for the income they can produce.
NAOS Absolute Opportunities Co Ltd (ASX: NAC)
This is a listed investment company (LIC) run by Naos, it looks to invest in small to mid cap companies with market capitalisations between $400 million to $1 billion. It focuses on the quality of companies rather than quantity, which means it has a concentrated portfolio of shares that will hopefully beat the market.
This approach has worked very well. Over the past three years its portfolio has increased by an average of 18.2% per annum before fees and expenses. It has paid a growing dividend each year since the second half of FY15. It currently has a grossed-up dividend yield of 7.73%.
WAM Research Limited (ASX: WAX)
WAM Research is the best LIC run by Wilson Asset Management. It aims to give investors to a diversified portfolio of undervalued growth companies, which are usually small to mid cap industrial companies.
Over the past five years its portfolio has grown by an average of 18.1% per annum before fees and expenses, outperforming the S&P/ASX All Ordinaries Accumulation Index by an average of 10% per annum.
WAM Research has grown its dividend each year since the GFC. It currently has a grossed-up dividend yield of 8.36%.
Arena REIT No 1 (ASX: ARF)
Arena is a real estate investment trust (REIT) that invests in property that it believes are in growing and attractive industries. This has translated into owning a lot of childcare properties and leasing them to some of the biggest childcare providers in the country like Goodstart Early Learning and G8 Education Ltd (ASX: GEM).
It has grown its quarterly distribution from $0.004 in 2013 to $0.032 for the latest quarterly distribution. Based on four $0.032 distributions it has a yield of 5.75%.
Foolish takeaway
I like all three shares but WAM Research would definitely be my favourite income idea of the three. It has the biggest yield of the three and it keeps increasing the dividend every year.
