Many investors at the retirement stage will be understandably focused on income of the fully franked variety to support their lifestyles and spending needs given they no longer they have a regular pay cheque coming in during a long retirement.
Fortunately the local share market is blessed with large-cap businesses that pay relatively high yields compared to overseas businesses, which means local retirees have the opportunity to secure good income streams alongside potential capital growth.
The idea of receiving monthly dividends is likely to be especially appealing to income seekers and the Plato Income Maximiser Fund Limited (ASX: PL8) aims to do just that.
It’s actually a listed investment company that invests in the unlisted Plato Australian Shares Income Fund and aims to pay out dividends from profits or income received for its unit holdings in the underlying Plato Income fund.
In other words investors can easily buy shares in the Plato Income Maximiser though a standard online broker like Commsec and get exposure to the performance of the Plato Australian Shares Income Fund and the potential for monthly dividends.
Notably the Plato Income Maximiser Fund LIC cannot guarantee monthly dividends, but has been able to make monthly payments pretty much since its May 2017 launch.
Its investment objectives are to outperform the S&P/ASX 200 accumulation index including franking credits and generate income on an annual basis in excess of the benchmark. The fund is managed by one of the most experienced blue-chip dividend investors going in Dr Don Hamson who is also heavily invested in the fund himself.
As at 10 April 2018 the fund’s grossed up annualised yield was 7.5% based on an exchange traded share price of $1.10, with the yield now even higher given shares in the LIC change hands for $1.03 today.
Some of the core holdings in the underlying fund currently include top-performing healthcare business CSL Limited (ASX: CSL), blue chip miner BHP Billiton Limited (ASX: BHP) and supermarket cash-generating machines Woolworths Limited and Wesfarmers Ltd (ASX: WES). While other dividend stalwarts like Commonwealth Bank of Australia (ASX: CBA) & National Australia Bank Ltd (ASX: NAB) make up some of the fund.
As such investors are getting broad exposure to some of the market’s most defensive companies via their reliable cash flows that should generate consistent income streams to pay out to investors.
It’s also notable that for dividend investors full franking credits can make up about 1.5% of additional income and it’s no secret that the Labor party is campaigning to halt cash refunds to eligible retirees of excess franking credits.
This could put a dent in the cash returns of some retirees who have little other income in retirement and as such Plato Asset Management has launched an online petition to register protest against the proposed changes. Anyone can hop on Plate’s website to sign the petition against a move to reform the franking credit system.
Of course as an equity investment vehicle Plato’s LIC comes with the usual market risks that means the value of your capital could fall in line with the broader market or worse if the fund underperforms the index.
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The Motley Fool Australia owns shares of and has recommended Wesfarmers Limited. The Motley Fool Australia owns shares of National Australia Bank Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.