Insights for Investors by Investors

Dividends, investor rights in focus amid pandemic

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I’ll do my best to avoid cliches, but to say 2020 was difficult would be an understatement. There is little doubt that we are all sick of hearing terms like ‘pivot’, ‘WFH’, or ‘iso’. Yet as we emerge, hopefully, from the darkest period for worldwide health and worldwide economic uncertainty in living memory [remember there have been two world wars], it’s worthwhile thinking about some positives which have co-existed with the many negatives.

As many of our columnists, contributors, and journalists commented, the world has probably changed forever. People are choosing a simpler life, some leaving the cities behind. Companies have seen the wisdom in greater workplace flexibility, such as working from home as a choice. The acceleration in many trends, such as online transacting, should lead to increased productivity and therefore economic growth.

Most governments, including Australia’s federal and state elected representatives, stepped up for the crisis. Notwithstanding the mistakes, they have bailed us out. And, as it was with the stories published in Inside Investor, forward looking, more optimistic items proved to be well read, relative to gloom and doom.

As the theme below will show, it seems readers remain focused on income, despite concerns flagged in the Government’s Retirement Income Review which stressed that superannuation should be drawn down throughout retirement.

  • By far the biggest hit was our profile on the Commonwealth Bank of Australia (ASX: CBA) and the sustainability of its dividend. The year may well be remembered as the time that ‘deferred’ dividends actually meant they were cancelled. But as the second half of the year showed, expert forecasters must be taken in context, with early predictions of a property price collapse proven far too pessimistic and banks potentially having written down more loans than they should.
  • The dividend theme continued as journalist Ishan Dan took his microscope to the dividend prospects of three non-traditional dividend players. Retailer JB Hi-Fi (ASX: JBH), glove maker Ansell (ASX: ANN), and iron ore giant Fortescue Metals (ASX: FMG) were identified with the latter still yielding close to 10% as the iron ore price rallies.
  • Big names continued to draw the eyeballs with industry doyen Geoff Wilson remaining in the headlines. The theme this year was his battle for ‘shareholder rights’ targeting underperforming listed investment companies and more recently flagging concerns with the capital raising process in Australia. Wilson noted that retail investors had been significantly worse off due to changes in the caps applied to placements due to COVID-19.
  • Finally, all eyes were on independent research house Morningstar which brought together the brightest minds in finance to discuss the outlook for the remainder of 2020 and beyond. High conviction calls from October have continued to outperform, including Westpac (ASX:WBC), Woodside (ASX:WPL) and Woolworths (ASX:WOW).

From an investment point of view, the time has never been better for investors. The pandemic has forced investment experts, thought leaders and journalists online with a proliferation of content now available in a much more digestible form. On the reverse, however, it has made it far easier for many investment groups to contact you, the investor, directly with 2020 seeing an incredible flood of small cap IPOs, direct property lending syndicates and any number of ‘wholesale’ investments.

While accessibility is important, the Australian Securities and Investments Commission (ASIC) recently highlighted concerns about whether these products are all ‘true to label’. Similarly, the decision for investment funds to target investors directly avoids the many ‘quality’ or ‘bullshit’ filters for lack of a better term that come from financial advisers, independent research houses and even the media. There are a lot of products, good and bad, out there and it has never been more important to ask questions when things seem too good to be true.

When I took over the publication of this title, my sole aim was to provide content that was relevant and useful to investors but most importantly to educate and assist in minimising the most common investment mistakes.

The Australian superannuation system is unique in allowing investors complete access and control over their capital; yet with this power comes great responsibility. Despite consternations from various sectors of the retirement sector, the cost of running an SMSF continues to fall and more investors are choosing to go along this route. Good quality information has never been more valuable or important.

As the calendar turns over once again, market uncertainty continues to reign. Whether it is rollout of a vaccine, Brexit, the ongoing US election, Chinese tariffs or oil price wars, the issues will never end. In two decades in the industry, I cannot remember a single period when everything was going right. This is the last edition of Inside Investor for 2020. The first edition of 2021 will be published on January 14.

We wish all our readers all the best for the festive season and new year.

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