Building a sustainable income portfolio

2020-09-28

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Since 2010 traditional blue-chip yield stocks have become notoriously unreliable for consistent income. Take for example NAB's dividend, which peaked at $1.98 in FY 14 before being chopped to $1.66 and then $1.13 in the prior two financial years. That's a 42% pay cut compounded with a significant decline in the bank's share price. Meanwhile, Telstra and Woolworths' dividends are 48% and 32% lower, respectively, since peaking some five years ago. This volatility of income underscores why it's...

Since 2010 traditional blue-chip yield stocks have become notoriously unreliable for consistent income.

Take for example NAB's dividend, which peaked at $1.98 in FY 14 before being chopped to $1.66 and then $1.13 in the prior two financial years. That's a 42% pay cut compounded with a significant decline in the bank's share price. Meanwhile, Telstra and Woolworths' dividends are 48% and 32% lower, respectively, since peaking some five years ago.

This volatility of income underscores why it's critical for investors to assess the sustainability of cash flows when considering dividend stocks, especially now given the level of stimulus sloshing around the economy, according to Neil Margolis of Merlon Capital and Michael O'Neill of Investors Mutual.

In this thematic, they break down what they look for in yield stocks, how they manage risks within their strategies, sectors they’re looking at today for income, and their top ex-20 ideas for sustainable dividends and capital growth.

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