Simple strategies for constructing an income portfolio

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George Boubouras, CIO of Contango Asset Management, says that investors have had a good run in recent years, however, he believes they should be prepared to lower their expectations when it comes to sharemarket returns moving forwards. “We believe that double digit returns are going to become even harder to get… For an equity portfolio about 10% pa is a reasonable expectation and accumulation will make up about 6% of that return. Australian investors are used to getting that dividend and we think accumulation will make up a bigger part of the total return in the years ahead.” In recent years the increased demand for income from investors has seen the yields between traditional and non-traditional dividend stocks converge. Woodside, BHP and RIO are all examples of companies who have reduced their cost based and increased dividend payouts to meet investor demand. Boubouras says this creates a potentially dangerous situation for investors who are screening stocks purely based on their current dividend yield. In this interview he explains some simple strategies for constructing a sustainable income portfolio.

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