Australian Equities Income Portfolio

Australian Equities Income Portfolio

The Australian Equities Income Portfolio is designed for investors who are seeking a greater level of income and who can make use of franking credits.

Portfolio overview

  • Investment bias: Style neutral with a quality focus
  • Benchmark: S&P/ASX 200 Industrials Accumulation Index
  • Investment objective: To outperform the S&P/ASX 200 Industrials Accumulation Index and deliver higher levels of income over a rolling three-year period.
  • Investable universe: ASX listed securities with a focus on the S&P/ASX 200
  • Number of stocks: 15–30
  • Asset allocation: Australian equities 80%–100%, Cash 0%–20%
  • Portfolio stock limit: 15% maximum weighting
  • Investment timeframe: 3–5 years
  • Portfolio managers: Scott Kelly (Portfolio Manager), Jamie Nicol (Chief Investment Officer)

Portfolio ratings

Lonsec Recommended

WARNING:
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Investment philosophy

DNR Capital believes a focus on quality companies will enhance returns when it is combined with a thorough valuation overlay. We seek to identify quality companies that are mispriced by overlaying our quality filter, our ‘Quality Web’, with a strong valuation discipline. The portfolio is high conviction, after-tax focused and invests for the medium-to-long term.

Investment strategy

The Australian Equities Income Portfolio has an investment style best described as ‘style neutral’ with above-average income and associated franking credits. The stock selection process has a strong bottom-up discipline and focuses on buying quality companies at reasonable prices.

The Australian Equities Income Portfolio also has a preference for companies that have high and sustainable dividend capability, strong profit-to-cash conversion, and relatively assured earnings growth. Companies that generate franking credits predominate.

We define quality companies as being those companies with the following five attributes:

  • earnings strength (particularly improving return)
  • superior industry position
  • a sound balance sheet
  • strong management
  • low environmental, social and governance (ESG) risk

The focus of the portfolio is on yield. We are focused on a growing, sustainable dividend yield above the market.

Where we are satisfied that a company possesses quality characteristics then it is eligible for inclusion in the portfolio. However, it must also represent value and sit comfortably within our portfolio construction requirements.

A range of valuation methodologies are used depending on the nature of the company being assessed to identify mispriced opportunities.

The portfolio construction process is influenced by a top-down economic appraisal and also considers the risk characteristics of the portfolio, such as stock and sector correlations.

For more information on the Australian Equities Income Portfolio, please contact us on info@dnrcapital.com.au or refer to our monthly update below:

Click here to download the Australian Equities Income Portfolio monthly update.

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