A senior financial services executive has suggested allocations to listed investment companies (LIC) can currently produce a better outcome for individuals prioritising yield and the receipt of franking credits.
To this end, Listed chief executive Ian Irvine revealed the current yield the Australian Securities Exchange (ASX) is producing is likely to be falling short of investors’ needs and expectations.
“Over the last 12 months to the end of December, the yield, or income, from the ASX 200 before franking [credits] was 3.5 per cent. No wonder people are putting their money into term deposits,” Irvine noted.
“Add the franking [credits] in and the [return] is slightly higher, but remember not all shares on the ASX pay a dividend, let alone a franked dividend.”
He indicated this was an identifiable point of difference LICs offer.
“One of the focus areas for listed investment companies is [to deliver] fully franked dividends irrespective of the underlying asset class, be it Aussie equities, global [equities] or even infrastructure,” he told delegates at the Institute of Financial Professionals Australia 2025 Conference and Expo held in Melbourne recently.
“So you have opportunities for diversification with dividends and franking [credits].”
According to Irvine, income investors purchasing direct shares have been unable to enjoy benefits in line with the appreciation in stock prices during the past calendar year.
“[For example], [the] Commonwealth Bank [share price] was $160 towards the end of last year and the year before it was $90. Last year’s dividend was $4.65 and the year before was $4.50. Certainly income hasn’t been keeping [up] with the appreciation in [share] price,” he explained.
“Everyone feels comfortable as they get more wealthy, but income investors haven’t been getting the same sort of [experience].”
He pointed out an allocation to a domestic LIC will also allow the individual to benefit from many years of investment management experience, noting the Australian Foundation Investment Company has been established for 98 years.
“It’s quite a testament to longevity and long-term thinking when it comes to investments. [These] are not buy and sell [operations], so [these are organisations] you would consider [investing with] for the long term,” he said.
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