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High Yielding Shares Reloaded

Discussion in 'Other Asset Classes' started by Ouga, 18th Jun, 2015.

  1. Ouga

    Ouga Well-Known Member

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    "Trying is the first step towards failure" Homer
    Thought I would post this up here to get this great thread underway in the new forum.

    ASX is down almost one percent today
     
  2. Ouga

    Ouga Well-Known Member

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    "Trying is the first step towards failure" Homer
    Perhaps not related to High yielding share directly, but I have a question.
    I recently got my first chunk of AFI and was planning on getting the DRP, however I have noticed there is also an option to get a DSSP.
    Below is an extract of the AFI documentation around this:

    In most circumstances, shares received under the DSSP should not be subject to Australian income tax at the time the shares are allotted, as under Australian legislation these shares are deemed not to be a dividend. For Australian income tax purposes the shares issued under the DSSP should impact the tax gain or loss which may arise on a subsequent disposal of the Bonus Shares and the Participating Shares.
    By the sound of it, it looks like DSSP issue shares are not regarded as income like shares received under the DRP. As such, it is not income reportable in the FY they are received, rather a capital gain/loss even upon the sale of the shares. You also forego the franking credits.
    Now, my basic understanding of this suggests:
    • If one is on a high tax bracket, it is likely to be a better option to go with the DSSP
    • If one's plan is to hold AFI in the future with no intention of selling and to use AFI as a future income stream, DSSP is a better option
    Am I being correct in this?
    Plan would be to hold AFI with no intention of ever selling, adding to the holding along the way and at some point in the future, receive the dividends directly as an income stream to support lifestyle. Based on my understanding, it looks like DSSP is a great option for this with no tax implications for the life of the investment as long as it is held.
     
  3. The Falcon

    The Falcon Well-Known Member

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    G'day Ouga,

    To the question at hand ;

    Yes indeed you have got it right. A Bonus share plan is an absolutely cracking way to compound long term wealth tax free until point of sale. You can then apply CGT 12+ month holding discount at time of sale. I was aware that Whitefield recently instituted a BSP, but not aware that AFI had one too.....for high income earners with the intention to compound very long term this is a huge tick in favour of LICs. Essentially, with a BSP employed, LIC's become an internally compounding vehicle for the holder, much like holding Berkshire Hathaway (as an example) where earnings are retained internally and no dividends are paid.

    PS. Was thinking now with sub-forum we might try to start LIC thread, a Dividend Focussed thread (ie. High Yield), ETF thread, a thread for traders, one for general market banter etc. Good Stuff :)
     
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  4. Ouga

    Ouga Well-Known Member

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    Hi mate, thanks for the reply.
    That's terrific. Indeed a major plus for LICs, it's great being able to accumulate without tax implications until sale. Will definitely go with that option.

    Your idea about the different threads is a good one - I like it !
     
  5. CatCafe

    CatCafe Well-Known Member

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    Hey guys,

    I just released some equity from my Sydney property and looking to accumulate some LICs.

    Just wondering whether I should be purchasing in the lower income earners name or not. Given current grossed up yields and mortgage interest rates, the investment will be positively geared. But what happens should rates go up?

    Or would it be safe to assume that rates would only go up in the event of improved business performance hence increased earnings and hence dividends will grow, and the investment will remain positively geared?
     
  6. The Falcon

    The Falcon Well-Known Member

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    I can't see the future, hence if you are planning on long term investments in LICs a trust is the ideal place for them. In 20 years when the capital is substantial the trust will give you a lot of flexibility.
     
  7. CatCafe

    CatCafe Well-Known Member

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    Can you tell me more about trusts? Where can I go for additional reading?

    Can I still gear through a trust?
     
  8. The Falcon

    The Falcon Well-Known Member

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    Paul@PFI or Terry would be able to provide advice mate. Actually there are plenty of variables and not as clear cut as I suggested so need to sit down with someone to look at your situation and plan accordingly.
     
  9. Ouga

    Ouga Well-Known Member

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    "Trying is the first step towards failure" Homer
    Agree with The Falcon here - you really need to get personal advise regarding trusts to see if this is for you - it is not for everyone, and it comes down to your particular situation. Remember there is a yearly cost in doing the accounting for the trust.
     
  10. r3ckless

    r3ckless Well-Known Member

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    Just purchased 7000 more S32 shares today. Taking my curent holdings to 10,000 in that stock alone. This year I said I was going to get into equities. Have around a $145k portfolio now where have been buying in heavily during the last month.

    Will get to around $200k end of the year, and aim to increase the portfolio by $50-$100k year on year moving forward.
     
  11. Redwing

    Redwing Well-Known Member

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    Why was that, r3ckless
     
  12. willair

    willair Well-Known Member Premium Member

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    would be interested to know what s32 is,plus the volume of sales is higher last month then buys once you scale the top 25-50 asx listed,maybe near the end of this month Greece does a runner and the cold water on the bbq plate goes into action..
     
  13. Darren A

    Darren A Well-Known Member

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    Hi Falcon,

    Would you mind giving me a brief explanation on what an LIC is. How do they differ from a super fund?

    Thanks in advance.
     
  14. The Falcon

    The Falcon Well-Known Member

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    Mate I'll start a thread on LICs soon :)
     
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  15. Darren A

    Darren A Well-Known Member

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    That would be great Falcon. Thanks for your reply.
     
  16. leon brown

    leon brown Active Member

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    Is now the time to go long on Oil stocks ?
    I can see a great resemblance to the 2009 oil crash

    I have been watching certain oil stocks for over 6 months now and I am waiting for a few things
    to happen to ascertain the direction of the price of oil .

    *Irans sanctions to be lifted ? if this does happen i assume the POO
    will reach new lows until demand increases
    *OPEC to decrease output ( unlikley )

    I am interested in buying the following coy along with a few smaller cap stocks and holding long term
    I plan to invst 20k in atleast 8companies with no stop losses just let in run and only check the portfolio weekly and DCA on red days .
    WOR,STO,HZN,WPL,OSH

    what are your thoughts
     
  17. The Falcon

    The Falcon Well-Known Member

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    I have added some Energy and Energy services stocks to my portfolio in recent times. These are long term positions. Cumulatively, maybe 10% of Portfolio.Given the current market conditions, there are worse things you can buy ;) Chevron and Exxon at 10x and 12x paying 4% and 3.5% respectively are not unattractive if you believe that demand for energy, and POO will be higher in 10 years than it is today. Plenty of opinions on energy long term obviously, hence share prices where they are. Personally, I prefer the super-majors to the Oz players in this space, though do have positions in WPL and WOR.
     
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  18. The Falcon

    The Falcon Well-Known Member

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    Who's buying what at the moment? I've added to QOZ (RAFI ETF), BRK.B (Berkshire B Class) and PM (Philip Morris) last couple of days.

    Anyone else?

    EDIT ; Continuing in the vein of the old "High Yield" thread on SS...which was really a general stock investment banter thread :)
     
  19. KDP

    KDP Well-Known Member

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    I bought some VAS yesterday. Looking to add a ETF that's "all-world" or at least tracks the S&P for some USD exposure. Just trying to investigate the best one for me given my tax situation and residency at the moment, seems to be the ones listed on the LSE.
     
    Last edited: 1st Jul, 2015
  20. The Falcon

    The Falcon Well-Known Member

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    A 0.05-0.10% S&P tracker will be available on pretty much all major exchanges...should be on Singapore too I think.