Ongoing inflation has reduced returns from cash-based investments and rather than relying on Australian income-producing shares, investors should be looking further afield at other dividend-producing stocks, the head of an investment firm has stated.
GSFM chief executive Damien McIntyre said persistent inflation had impacted the increasing number of baby boomers moving into retirement who want to protect and grow the value of their capital, which they could do by shifting from localised investments.
“Allocating investment capital to global equities for income provides a powerful combination of portfolio diversification, long-term capital appreciation and potentially consistent yield,” McIntyre added.
“By looking beyond the Australian market, investors can access a vast spectrum of high-quality income opportunities and sectors that are often underrepresented in the domestic market. Investing globally for dividends can build more resilient and growth-oriented income streams and portfolios.
“This can reduce the concentration risk from investing in Australian equities.
“The Australian share market is heavily concentrated in banks and the big miners. Global markets provide exposure to dividend-paying companies, large and small, in sectors such as technology, healthcare and consumer staples, which are far less common in Australia.”
He noted that while global markets shifted into disparate cycles of monetary policy in 2026, corporate fundamentals remained robust.
“Resilient consumer demand and disciplined cost management have bolstered free cash flow, providing a solid foundation for enhanced shareholder returns,” he said.
“A defining characteristic in the US has been the broadening of the income set; traditional growth sectors, most notably the technology giants, have matured into reliable dividend payers, offering investors a combination of structural growth and tangible yield.
“Significant scale and consistent free cash flow have allowed for a shift in capital to investors. By initiating dividends, these companies are signalling financial maturity and a commitment to shareholder discipline, becoming attractive to investors who previously looked to more defensive sectors for income.
“More broadly, many large multinational companies, especially in sectors like utilities, healthcare and consumer goods, have consistent dividend policies. This regular income stream is especially attractive for income-focused investors and can boost returns from equities overall.”
He also pointed out investments in cash and bonds were being left behind from a real returns standpoint.
“It’s just not the cash yield that leaves investors left behind, it’s the capital value of those investments as well,” he said.
“In today’s world, ‘growth’ doesn’t just mean higher gross domestic product, it means growth in inflation as well, and when inflation rises, as it is now, it erodes the capital value of a bond.
“Bonds certainly can’t hedge out the negatives associated with rising inflation. Only equities can hedge out inflation because in many cases the higher costs listed companies incur can be passed on to end consumers, minimising the risk of reduced returns.”