Well, we're very active managers. So we don't just sit in and come mov bank all year and get three and a half percent cash yield. That's not great, as you said, I mean, what we do is actively trade our strategy to maybe get Conwolf banks vital dividend, which was paid a couple of months so back, and then we'll potentially sell out of the sell down our holding and move into other stocks paying dividends at other times
of the year. So we actively trade to try and get capture more dividends, and that way we can generate a lot higher income than the market, because, as you've said, the market's income now is pretty lousy.
The reality is.
There's only so much you can do that the market yields well cash yield actually our latest numbers of three
point seven percent. We can get a couple percent more by doing this rotation, but as there is a limit to how much you can get, and the reality is we've beholden to the amount of dividends that are being paid and we'd certainly like dividends to increase, but for dividends to increase, earnings need to increase because that's how companies can pay uvans and for that to happen, we need to see the economy being stronger, and hopefully we will see rates falling fairly stood and hopefully the economy
will start to well get back to a normal pace of growth and companies can expand their earnings.
Have you seen any and I doubt the banks are in this group, but have you Are you aware of any stocks that fit that description that the yield is healthy as good as anyone else, but their forecast, their compound annual growth forecasts are at the level you'd like to see the whole market. Are the companies that are outstanding there? We don't like to give too many stock chips of the trust. No, I don't mean this is fact on the public record. I mean I'm thinking of someone.
I saw a piece recently where someone looked at the whole top fifty on an income basis and who would grow and they found three three that matched their criteria for income growth.
I mean, that is it? That grim?
Look, it's pretty tough out there because the bank's earnings are pretty flat, albeit they have low bad debts, so people will worry they were going to have a collapse at earnings, but their earnings are still fairly strong at strong high levels, but they're not growing substantially.
Resource stocks.
Most commodity prices are down, but I would say one are the bright areas there are going to name stocks, but gold prices have held up very well, and the sort some very large increases in dividends, albeit from phairly small levels in gold stocks.
Right.
And an area that a year or two back was struggling was the utilities, but the likes of AGL and Origin, the prices are growing, they're starting to make more money. And like the insurance for the last couple of years, but it's probably getting towards the end of the insurance cycle. But I'm sure your listeners all know the insurers have been jacking up their prices and insurance premiums have been growing well. One way to heats that is to be an invest an insurance company.
Rise.
Okay, just before we go to the break, can I ask you about the banks? Everyone got it wrong? Right, not almost everyone? I mean, And I did some coverage on this, and maybe I was lucky, but I remember thinking I actually did a piece one night one weekend and said I've just seen yet another one of these stoff broken rodes.
Sell all your banks. And I was.
Saying to our readers, don't take this, read this in context. This is an institutional broker dropping to institutional investors. They trade in and out of banks. If you're a long term heroldholder of the bank, be very careful about selling banks. As it turned out, banks were, I mean, way better than I thought. I thought that they just wouldn't fall, as these brokers had suggested a few months ago, And it turned out that not only did they not fall,
they've been absolutely maybe absolutely unbelievable, haven't they really? For big four banks that were the business is only ticking along really on many fronts. But the share price surging ten twenty percent in some stage for big four banks, and now they're still seeing so of them, which, of course, you're right in the end, You're always right in the end. It'll be a stop market crash some day. We're all going to be right about that. We just don't know
when where do we stand now on banks? Do you see them they're so important? Do you see them as appropriately placed at these levels?
I'll first say that we didn't sell all our banks, that's for sure. We still see there's some pretty good dividends out of them, so I suppose we were't overweight, but we held a sort of index weight to the banks, so we certainly didn't get sucked into the sell them all because there's going to be a disaster. But look, they're certainly not cheat. You going to mean combacks now on a price earnings ratio of twenty four are very very low dividend yield.
They're certainly not cheap, but.
I would say that they're pretty good quality. I might get myself into trouble here, but i'd call it a cozyologopoly. You've got the big four banks, there's not a huge amount of competition, they're well capitalized, they haven't got any
bad debts. So I think that the issue was go back eighteen months ago, there was a lot of scare mongering and people, a lot of strategists and as you said, some of the institutional bank analysts were very negative on banks and thought that'd have huge bad debts and it hasn't eventuated because infrat rates haven't risen much. More Over, they'd be pretty stable. Over the last twelve to eighteen months,
house prices have generally gone up for it. A couple of markets have gone down a little bit, but not much. And if you think about it, banks are a leveraged quay on Australian property because most of their loans now are mortgage loans and if they out in Australian housing market is solid, then there won't be bad deads and that's what's happened. So and I think the outlook is still pretty good so Australian property. So I think the Australian Bank's still pretty good. But you are paying a
lot for them. I suppose that is the issue.
Okay, very good, but take a short break. We'll be back in a moment.
Hello, Welcome back to the Australians Money Positive podcast. I'm James Kirby. I'm talking to doctor Don Hamson of the Pedal Investment Management. They have a variety of funds. The fund in particular that has triggered the invitation. You know what I mean for Don, is there flagship fund which is.
Called a steep Place Australian Chairs Income Fund, our.
Reats, real estate investment trusts, property trusts are they included? They're technically not shares there. Realestate trust Are they included in your basket.
Of Yes they are because they're listed, they pay cash. It might not be called it's called the distribution, but it's still essentially cash being paid out. So yes, they're in the our universe there and we have some of them in our fund. But what they don't have generally is freaking credits and should One of the icing on the cake of dividends in from companies in Australia is you get these tax credits called freaking credits, and they're quite valuable and you don't get them with reats.
So I expect the read the property trust has to be better basically if they like for light than the share to get into your portfolio because it doesn't have the franking are there?
How do you see reads right now?
Because they they're very beaten up right, everything went wrong, everyone working from home and the interest rate's going the wrong way on them.
So they must be promising?
Are they? At the moment?
As a sector they're starting to look good value?
That's correct, But I think COVID has still changed the world. If I work in the center of Sydney, you're in Melbourne and the Mondays and Fridays, it's still pretty quiet in Sydney and Melbourne. That whether you're a coffee shop owner or you're a building owner. If you haven't got a lot of customers for two out of five days, it's going to be tough to make ends meet. It's going to be tough to charge your coffee shop at
huge rental, those sorts of things. So a lot of people say working from home, they're hot desking, et cetera. So what a group two don't have as much demand for space, So that trend like it's slowly working its way back, but there's some groups to talking it up that they want people in five days a week, but there's still a huge number that are probably more like two to three days a week. And so I think it's particularly the office area is pretty soft. Some of
the in the suburbs. In retail is looking better, but you know, reats have been a fairly soft area. One of the areas of one of the companies we've liked, US has been good in group because they've they're really a developer more than anything else, but they've called the cycle very well and they're they're almost an AI play in Australia because they're developing data centers around the world and doing that very well. They've got their footprints on it that before that they were ahead of the pack
building distribution centers for deliveries, et cetera. So they've called it very well and from a totally termed point of view, have been great. But they're not good from an income point of view.
Yes, because they're so highly priced, because they're so been so impressive for so long. Amazing company. Absolutely, Larry Goodman. Greg Goodman has managed to not just write out all the times of trouble in property market, but it's that amazing thing where he seems to be able to strategically look ahead and then execute on that and get it right. And if you get the strategy right on very big companies, as we all know, you can get a lot of
things wrong if you get the strategy right. So just one last thing on the property trust and it sounds to me like you're not exactly scooping them up as bargains out there. I mean, Goodman, as you say, is exceptional.
Really yeah, No, we're not significantly increasing our exposure, that's for sure there. And as the fact that they don't have Frankie means they're sort of unattractive from a your point of view. And that's an interesting thing is that whilst our fund is called an income fund, we also try it out for so it's not all about income. And as I mentioned before, if I think most people as health CBA stock are very happy, that's training one hundred and thirty five dollars. The yields stay down a bit,
but tighter return terms. You've actually done very well out of the last twelve months out of a the banks.
Really all right, Look, we take a break.
We's got some great questions off which are very suitable she rates, especially for you. So we'll be back in a moment. Hello, Welcome back to the Australian's Money Puzzle podcast. James Kirvey here with Don Hampson of the Plato Group, and we're talking all things dividends and income on the Australian market, which as I say, is so important on the Australian market because we have franking credits, which means
that your income is always better than it seems. And if your bank pays four percent, in fact in reality it's probably five or six percent to you. If you're retired, it's even higher. I remember, the less tax you pay them, the better they are, which was a point great, a point of big contention recent election, but I think everyone learned from that about franking credits and how they were Now. The first question is from ran Jan and he says,
I like this question. There are often reports about meetings between analysts and management of listed companies, and after these meetings, the analysts publish their notes to their clients. The notes are picked up by the media, and small investors like me do not get such access, and he wonders, basically, do this is this reflected in this share price? And this is the whole thing fair. He also mentions the
fact that he does podcast while he's ironing. I will be got lots of ironing to do, rand Jan, because it's a half an hour long podcastle I used to make out that it was about three minutes per shirt. That was always my ruler on the ironing. We were always asking people, don't what they do when they're listening? You see so so rad John studs out. We haven't had someone say they do their ironing before. Tell me about that privileged access. It must be somewhere in the
middle there. We saw major bank recent the I mean a big four bank banned from RBA meetings if you don't mind, if you don't mind, because of the exact issues like does it matter to you, professional investor, how much have you got under management?
Ah, we're approximately seventeen billions.
Seventeen billion, that is, that is a big amount of money under management. Do you get invited to everything you want to In the way of these press briefings, we.
Tend to, well, it goes too many of them, actually, because look, I think this is where the world has changed many years ago. But in the good old days, the view was you would go to company management, you'd have a chat with them, and they would tell you things that are not on the public record, and you
could get virtually access to inside information. But that's definitely these days and as it does crack down on that, and so there's not there shouldn't be as well, this way, there shouldn't be any information that's sort of inside that it's releasing. Those analyst meetings, et cetera. Would I've been to quite a few in the past, and most of them it's management just blowing their own trumpet to some extent, so.
Telling you how great everything is going. Yes, that's right, Yeah, I know all too well.
Yeah, so we don't tend to spend a lot of time there, but Ooka, I don't think it's a big deal these days. I think maybe twenty thirty years ago that was definitely a concern and that's why asks you pushed the companies and made sure that they aren't disposing it. But occasionally there might be something let's let's slip it. If a company does do that, they should technically immediately announce it to the market that they've said something that's.
I imagine Ranjan and all listeners. It's more an issue with small small caps because still things are tight and maybe not many people turn up to their briefings anyway, they're so delighted that someone actually arrives they probably tell the broken more than they should. That's one thing, But then at the other level, it's stunning really that the RBA have had issues with major banks and their briefings,
and there's always issues around that. How do you communicate effectively to the market without giving someone privileged over another don Is there some AI software something that you guys can use to tune into some of these often terribly boring three things and pick up matters.
There is, actually, yes, we do use artificial intelligence to actually read our management transcripts to try and pick.
Out the toad all it.
But remember that and because the problem is in Australia there are three hundred companies and we also manage global equities as well, and they're literally that we track about ten thousand, so there's no way anyone has a team big enough to be able to read all of those, and so we do our use AI techniques but also targeted. So for instance, we'll be looking at keywords around dividends
because we are very income focused at franking credits. Right, nice, but yeah, look at these and we've been doing this for a number of years. This isn't something that's like just Johnny come lately in the last twelve months when everybody gets hyped about. We've been using these sorts of techniques for quite a while to find out little bits of information that might be hidden somewhere.
And that's fascinating.
It's take an enhancement of control F on the BDF if you're looking for it for dividend. I know when I go into the budget, I do control F super et cetera. So okay, just one nice te on that is it morthat is it. Do you think it's an enhancement to your actual effectiveness.
Look, it is marginally beneficial, but I wouldn't say that it's changing the world dramatically. And I think this is where there's a lot of hype about AI and it's going to make no one's going to have a job and all that sort of stuff. But the reality is you need to be very cautious the way you use it, and I think the benefits are still relatively marginal.
Now maybe over time.
I'll definitely get better and etcetera. But you need to be very careful how you use it, and at the moment the results, yeah, marginal. There's a benefit in doing it, but it's not chalk and cheese.
Very interesting.
I read a terrific piece in the Wall Street Journal last weekend where one of the chiefs of AI at Meta, who is also a famous economist in his own right, said that AI that at the current levels of AI were no more intelligent than the average housecat, which was an extraordinary thing to say for someone who was in the head of AI at Meta. Now that's as simple as it sounds, but he was making the point that
many were overestimating its impact and if he's right. If he's right, of course, then you got to question a lot of the heat around AI stocks in Nvidia or even you just mentioned Goodman or next D seats, et cetera. But we'll come to that another time because we've had some specialists on AI. All right, thank you for the question, manj and really good topic there. And this is in information only. Everybody you know that it's not advice. Okay,
scific question from Josh. Is there growth left in Transurban over five years? It's down eight percent? Small dividend. Interesting question, Josh. Now, Transurban was very much one of the very much like basically the banks, the two supermarket groups if you were so inclined and prepared for the cyclicality, the two big miners, and then Transurban. They really were the backbone for dividend players in the share market. Transurbent, I look at the stock and I see it's been doing nothing for years.
I see that it was a fabulous stock for a long time.
It's differ in.
Deed as I recall, it's about four it's actually more or less the same as the market, So there's nothing particularly wrong with it.
Have you any view on it?
Done well?
Again, it doesn't have franking, so that makes it less attractive for us.
I mean, you look at it, it's.
Essentially owns to roads and so what you need is either more cars on the road or they need to lift their prices in their Yeah, those process generally a link to inflation in some of their roads.
To have a bit more ability to do it.
But I think COVID, now it's four and a half years ago, but showed that at least thing the safe, as safe as gold.
It's demand can change, and maybe.
It's still a long way away, but if we have self driving cars or other things, maybe there'll be more cars on the road.
Maybe it'll be less cars on the road.
So if he knows what, it's very interesting.
So so it sounds that it's not.
The stock it was.
Yeah, I think, to be honest, we've never been a big fan because it does over the Frankie. It's not you know, it's not as I yield. So it's relatively safe. But safe stocks can get hurt when you have a COVID event.
Just like you.
We're talking about that the cities on Mondays and Fridays. I still I am still even now amazed I can drive home on a Friday afternoons so easily. It used to be hell and I just cruise home every Friday afternoons, which tells me that I am among along the minority that's in the city. All right, Nick, it's in the turbulent start of the year for minreys mineral resources, one of the big lithium players. Huge price drop followed by
mixed headlines. Do you see bride prospects from minrays and lithium? Well, Rio Tinto certainly see bright prospects. And they just paid a hell of a lot for the Arcadian lithium operation. I mean a lot more than anyone thought it was worth. It's obviously worth a lot to Rio because they can kno get into the sixtra ordinary fantastic in the global mining compendium of resources that they have. Where are you on the miners, I know they're sickrely go when they're good.
They're really good, aren't they? As dividend pairs? And then they really topple over. What do you what's your views?
Well, what'll be flipping answer a bit. I mean mine is already gonna be as good as the one of the processes that they are. And in the last twelve to eighteen months has been a big fall lithium process because evs haven't Demand hasn't been as strong as people thought.
Aubrids are actually become.
More think more in vogue than evs, and there's been a lot of supply because there is a lot of lithium around the world. They also have iron oreso iron ore prices are also down, so there are two main commodities are going against them. I'm probably more bullish in the longer term because I think we will eventually get to a worded world of electric cars and pat Memal Resources itself is going to electrify a lot of its
operations and reduce submissions. I think iron ore prices probably will come back in the longer term because it's not all about China. I think the prospects for I'm talking the very long term here is India, but there might be so many years before India sort of the demand from India ossets potentially softer demand from China below. China has been doing a few things to increase their their GDP recently.
Yes, yeah, absolutely, all right.
One last question from Michael, and it's about ETFs, which I imagine you hear a lot of both done as it used of ETFs though Jack Bogel's books, Jeff Bogel being the original of the species here, he basically created the index fund and then created Vanguard, which is by the way, I'm mutual. I always said, that's amazing. It's not as a mutualized operation. Okay, So here's his point. What I find amazing is commentators keep preferring to buying index funds
as a way of getting average returns. But in Jeff Bogel's words, it's not delivering average returns. If you're investing for ten years, you're guaranteeing yourself to be in the top fifteen percent of returns. It's a really compelling message. So many plusses about ETFs, and we met regularly mentioned them on the show. So many negatives too, which don't get mentioned on generally, but they get mentioned on this show.
Among the fact that you're buying all the rubbish and all the dross on every market, Among the fact that you're ethically oblivious to what you're buying, Among the fact that you're buying the stock that's completely widely overpriced. You got to keep buying it because the ETF must do it because it must reflect the index. There are weaknesses there with ETFs. When someone says to you, I like your idea. I love this idea of you focusing in an expert way with an expert team behind you on
Australian high dividend shares. When someone says, why don't I just buy a dividend DTF, what is your well rehearsed response to that DN.
Well, maybe we're in the top fifteen percent ourselves because we've out formed the index over the thirteen years since they've played our stranger's income funders being willing after fees. So we've bet an index. But I would say that includes the franking. But we compare ourselves with an index that obviously includes franking as well, so that it's apples
with apples. Of course, I think a lot of the other thing I would say is I think a lot of that Jack Bogel stuff is based on US share markets, where I think it is tougher to app form the index for active managers, where particularly if you look at the wholesale surveys in Australia, there's quite a few a lot of Australian chair managers have actually outperformed.
Over the longer term.
Those are before fees though, so fees are very important. So if you think you're investing acive manager, but they've got egreges fees and performance fees and other things on top of that, you want to be careful about how much they're charging.
Okay, very good, terrific. Look, thank you very much for being on the show. I know it would be good and we had a great discussion on this issue. The dividend picture is changing. It's a paradox maybe that it's changing because the share prices of the banks have finally lifted after many years ago doing nothing. But it creates new issues and it was great to talk.
About that today. Thank you, Don Thank you James. Love to have you on.
All right, folks, keep those emails running. I could do with some more questions. It comes in waves. I had too many. Now I have some spared capacities, so let's have them. The money Puzzle Australian dot com dot au. Questions, comments, observations, even complaints all welcome. And as I said, next week, I'm going to have a bit of frank with Alex Moffatt because he was on the desk the day the Australians woke up in October nineteen eighty seventy here that
the share markets had fallen twenty five percent overnight. That is something that a lot of people can't even imagine.
We're going to talk about that next week. Talk to you soon.