Searching for Yield

Last week my five year old daughter perused the room service menu at a luxury resort in Port Douglas, went past the seafood and steaks on offer and ordered baked beans on toast. This order not only pleased the individual that was paying the bill and the simple tastes of a small child, but it was also within the budget afforded by the paltry 2.3% that she is currently getting from her ANZ Term Deposit.

At current risk free rates even wealthy retirees who have amassed $1 million in a superannuation account face a very meagre retirement (unless they have the same bland tastes in foods as small children), if they are looking to live off income rather than eat into capital. As the market is speculating that the RBA may cut cash rates even further on Melbourne Cup Day, if this occurs the hunt for yield amongst Australian retirees will only intensify.¬† We would expect investors to rotate investments out of cash and into other yield assets such as shares and listed property trusts. In this week’s piece we are going analyse what to look for when assessing the sustainability of a distribution.

Read more here.

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