As market uncertainty rises, the search for sustainable income becomes more important. Underlying portfolio performance is the main driver for the ability to distribute a satisfactory level of income to the beneficial holder. However, during periods of a market downturn other factors will become just as important.
An LIC can become a valuable source of income as, unlike managed funds and ETFs, they have the ability to retain earnings and franking credits across periods to enable a sustainable growing level of dividends over the long-term. Australian Foundation Investment Company (AFI) has been steadily growing its dividend for over three decades, receiving a greater level of cash dividends than it is paying out whilst having a profit reserve of over $1bn. AFI currently offers a net and gross yield of 3.9% and 5.5%, respectively.
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