Time for big caps to take some risks

Perpetual Limited

As investors have searched for yield and growth in a market where they’re increasingly difficult to find, large-cap stocks have responded by increasing payout ratios at the expense of reinvestment, says Vince Pezzullo, Portfolio Manager at Perpetual Equity Investment Company (ASX:PIC). “The problem with that strategy is that at some point you don’t reinvest in your business, your growth rates will start to roll off.” Telstra has been paying out 90-95% of its earnings for the last 5-years, keeping investors happy with large dividend cheques. Now CapEx needs to be increased by $3bn because “technology has caught up.” If Telstra had instead reinvested a greater portion of its earnings, it would be better placed to defend its market position. “We think there’s been a lack of investment . You have to take some risk.” In the video below, hear Vince’s outlook for large-cap dividends.

Perpetual Limited

Perpetual Limited is an independent and diversified financial services group providing specialised investment management, wealth advice and corporate fiduciary services to individuals, families, financial advisers and institutions.


dividends telstra ASX:TLS ASX:PIC


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