With interest rates at virtually zero, bank deposits are not even counted as investments these days.
For example, at the Commonwealth Bank of Australia (ASX: CBA), you can lock away your money for 5 years and it would only earn 0.25% per annum.
That's actually shrinkage in real terms, as inflation would likely run much higher than that.
So if an ASX shares fund declared that it's on track for 10% gross income this financial year, a few eyebrows would be raised.
But that's exactly what Plato Australian Shares Income Fund did this month.
Buybacks and miners handing out cash like there's no tomorrow
Senior portfolio manager Dr Peter Gardner said multiple factors had come together to form a tsunami of yields.
"Because we manage our portfolio specifically for low tax investors such as retirees, we have been able to take advantage of off-market buybacks undertaken by key portfolio holdings including CBA, Woolworths Group Ltd (ASX: WOW) and Metcash Limited (ASX: MTS)."
After buybacks, ASX shares in the mining sector had treated investors well too.
"While the retraction in the iron ore price has worried investors, we've seen companies such as BHP Group Ltd (ASX: BHP), Rio Tinto Limited (ASX: RIO) and Fortescue Metals Group Limited (ASX: FMG) generate exceptional cash and franking credits for investors in recent months and many of these strong companies remain highly profitable," said Gardner.
"Looking ahead, there will be further tax-effective income opportunities in the sector. In particular, we think the BHP and Woodside Petroleum Limited (ASX: WPL) merger could result in BHP's petroleum assets being spun-off in the form of a special dividend with franking credits attached."
Don't worry about Omicron
Even with the COVID-19 Omicron raging across the world, Gardner reckons the Australian economy looks strong heading into 2022.
"There appears to be little political appetite for widespread lockdowns in the foreseeable future and while variants bring uncertainty, we feel the strong economic bounce-back we've seen over the past year is sustainable," he said.
"So when you look at financials, a return to pre-COVID levels of dividends looks likely over the next year and many of the leading banks have robust balance sheets."
And with consumers armed with a cash stockpile after lockdown, retail ASX shares have much potential in 2022.
"We expect strong retail trading over Christmas to benefit select retailers such as JB Hi-Fi Limited (ASX: JBH) and Super Retail Group Ltd (ASX: SUL)," Gardner said.
"The retail sector is another area that could generate strong income in the second half of the financial year."
Gardner added that an actively managed portfolio is critical to maximise the yields currently on offer.
"We do think investors are in the midst of a bonanza year for dividends."
Over its 10-year life, the Plato Australian Shares Income Fund has returned 9.4% of income per annum including franking credits.
