The key to yield investing – avoiding dividend traps

Dr Don Hamson

Plato Investment Management

At the end of August 2015, Myer (MYR) had a historical gross yield of 14.8% making it look attractive to many funds and investors seeking high yield. On 1 September MYR announced it will not pay a final dividend this fiscal year, and it would in fact be raising money from investors in the form of a dilutionary entitlement. According to Plato, it has identified Myer (MYR) and a number of other Retailer, Small / Mid Cap Mining, Energy and Mining Services companies as likely dividend traps (refer to the graph below) based on recent cuts in the company’s dividend or is forecast by Plato to cut their dividend. Reducing exposure to high yield stocks that are identified as likely dividend traps should potentially avoid capital losses for investors. In comparison, 3 of the top 5 Australian equity ETF's by fund size (according to Morningstar) hold 3 or more of the companies identified by Plato as being dividend traps. (VIEW LINK)

Dr Don Hamson
Managing Director
Plato Investment Management

Don has over 25 years investment management experience. He founded Plato Investment Management Limited in 2006. Prior to Plato, Don was Head of Active Equities, Asia Pacific and a member of the global Senior Management Group at State Street...

I would like to

Only to be used for sending genuine email enquiries to the Contributor. Livewire Markets Pty Ltd reserves its right to take any legal or other appropriate action in relation to misuse of this service.

Personal Information Collection Statement
Your personal information will be passed to the Contributor and/or its authorised service provider to assist the Contributor to contact you about your investment enquiry. They are required not to use your information for any other purpose. Our privacy policy explains how we store personal information and how you may access, correct or complain about the handling of personal information.


Sign In or Join Free to comment