Since our last communication the financial markets have continued their wild ride.
Our message to you remains the same. Your financial plans have been structured so that you have access to cash to meet your expenses so that you don’t have to liquidate equities in markets like that which we are currently experiencing. History shows that the rebound from such market corrections is generally swift. Dividends will continue to be paid.
On that subject we attach pertinent article from Macquarie on the subject of dividends. The key takeaways from the Macquarie article are:
- COVID-19 will drive a meaningful reduction in Australian corporate earnings. By association, dividends will also decline as many corporates make deep cuts or forgo dividend payments altogether. The silver lining is that a hit to dividends should only be temporary and will bounce back over the coming quarters.
- Near term, income seeking investors have few options to supplement lost income with bond yields near record lows, credit market risks rising and traditional income safe havens (i.e. Real Estate Investment Trusts – REIT’s) also under pressure. Macquarie do not recommend altering portfolio allocations to chase yield particularly within equities
- The current crisis is impacting earnings and not balance sheets. As the economy normalizes, so too should dividends. For income seekers, maintain a diversified portfolio until downside growth risks decline. Macquarie prefers Equities over Property over Fixed Income for those focused on generating income.
We are here to guide you through this unprecedented market correction as we did for many of you through the GFC and other crises. Do not hesitate to call me or others in the Collins Mann team.