Where yield-seeking investors can find opportunity

Yield-seeking investors, such as SMSFs, have different income requirements compared to other investors, says Max Cappetta from Redpoint Investment Management. While the unprecedented fiscal and monetary policy settings, aimed at effectively hibernating the economy through the past year, is well and truly reflected in share prices, some corporates have so far been more conservative and held back on dividend payments. Max says this conservatism in pay-out ratios has been a double hit for self-funded retirees, who have also seen interest payments on cash deposits cut at the same time. However, it's clear that dividends are returning for equity investors, after the largest contraction in payments in living history. Max points to the growth in dividends from the resource sector is of particular note. This is driven by iron-ore price hitting all-time highs. He says this is being driven by strong global demand as well as production issues in Brazil tightening supply. Redpoint's key picks are Fortescue, Rio Tinto and Mineral Resources. And Max says bank dividends too, are on the way back, as demonstrated by CBA's results. He explains that government and RBA support has meant that earnings and debt provisions have not been as bad as expected, but new lockdowns are cause for concern. Redpoint says there are also a range of dividend winners over the past year that are growing dividends or looking at returning capital to investors via buybacks and key examples are in retail, such as JB Hi-Fi which grew dividends in 2020, along with supermarket retailers. So where is he putting the money?