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Investor Update for July 2021

Season’s greetings!

As with every August, dividend season is again on our doorsteps. Over the next two months, 116 companies in the ASX 200 Index are expected to deliver the largest quarterly dividend payout in history. Relative to the market this equates to a 1.3% dividend yield for the two-month period from today, with franking on top of this.


There is a high degree of concentration in the quarter’s payout. Nearly two-thirds of the quarterly dividend payout is being driven by five companies, comprised of Rio Tinto, BHP, Fortescue, Commonwealth Bank and Wesfarmers. The composition of these dividend heavyweights, with three miners included, belies the real driver of the bumper dividend season.. iron ore. 

Are the mining dividends sustainable?

Fortescue is perhaps the most pertinent case in point. As the iron ore price has surged over US$200/t, so too have the dividends.

For these levels to be sustainable, we would argue that so too the iron ore price needs to be sustainable. Based on most analysis we have read this seems difficult to justify. Observing the price of iron ore in the past two weeks, which as fallen over 20% from it’s highs, it’s clear to see the reason why the miners are classified as ‘cyclicals’.

The sleeping giant - banks

While the dividends from the miners may be near peak, the outlook for the banks looks decidedly different. With APRA removing the payout handcuffs late last year and balance sheets now appearing well capitalised, it seems Suncorp and CBA have already taken the lead in upping dividend and tax effective capital return initiatives to investors. Perhaps more of a slowburn than the massive ramp up in the miners payouts, but meaningful nonetheless given that the 4 banks still account for over 20% of the broader index.

Wheelhouse Australian - an alternative for boosting dividends

As we head into dividend season we felt it worth flagging our expectations for our Australian fund over this period. The strategy benefits from dividends on $2 worth of equities (and equiv franking) for every $1 invested. While the primary objective of the strategy is outperformance vs the ASX200, and assumes market risk to do this (in contrast to our Global fund), the income return during high dividend periods is also expected to be meaningfully higher than the market. Please email us for any questions on the Australian fund.

Wheelhouse Global Equity Income Fund

7.9%

Income over 3 years (p.a.)

9.0%

Total Return over 3 years (p.a.)

 1 month1 year3 years (p.a.)Since inception^
Income0.00%9.39%7.86%7.55%
Growth3.37%5.69%1.15%1.50%
Total Return3.37%15.08%9.01%9.05%
Benchmark*4.03%31.85%15.07%14.41%
Risk (Beta)**n/a0.450.490.59

Performance figures are net of fees and expenses.
* Benchmark is the MSCI World Index (ex-Australia).

** Risk is defined as Beta and sourced from Morningstar Direct. Beta is represented vs the Benchmark and vs the S&P/ASX 200 Index. A Beta of 1.00 represents equivalent market risk to the comparison Index. A minimum of 12 months data is required for the calculation.

^ Inception date is 26/05/2017. Since inception figures are calculated on a p.a. basis. Past performance is not an indicator of future performance.

Click here to read the full performance report of the Wheelhouse Global Equity Income Fund.

Wheelhouse Australian Enhanced Income Fund

Performance numbers below are based on exit prices and include the 30bps exit spread.

 1 month3 monthsSince inception^
Income*0.00%3.74%3.92%
Growth1.34%2.52%6.54%
Total Return1.35%6.26%10.46%
Benchmark**1.10%5.97%10.07%
Excess return0.25%0.29%0.39%

Performance figures are net of fees and expenses.

* Income includes cash distributions and the value of franking credits and special dividends. Cash distributions are paid quarterly.

** Benchmark is the S&P/ASX 200 Franking Credit Adjusted Daily Total Return Index (Tax-Exempt).

^ Inception date is 9/03/2021. Since inception figures are calculated on a p.a. basis. Past performance is not an indicator of future performance.

Click here to read the full performance report of the Wheelhouse Australian Enhanced Income Fund.

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