ASX Income Portfolio: About

By Rivkin

How Does ASX Income Work?

Income Streams From High-Yielding Hybrid Securities

Designed for investors who want a steady dividend stream as an attractive percentage of the original investment amount, with less risk than dividend-paying shares.

This portfolio focuses on ASX-listed high-yielding hybrid securities, typically paying distributions on a semi-annual basis. It is relatively passive and carries the lowest risk out of all our portfolios, suiting investors who want a less volatile capital value than a typical portfolio.


Need to Know

Goal Market Risk Re-balance Horizon Minimum Suggest Investment
Income stream from high-yield hybrids Australian Medium Infrequently, on average 2-3 trades per year Recommended minimum 3 years $2000 per stock (model uses $5000)


How Does ASX Income Work?

We identify the highest-yielding hybrids and hold them long-term, to collect the regular income stream that comes with these securities. To do this, our analysts rank the universe of hybrid securities by their yield to maturity and eliminate any with low liquidity or that we consider a moderate or high risk of not being able to make dividend payments. We then select the seven highest-yielding securities subject to some additional criteria (such as liquidity and an aversion to holding more than one hybrid per issuer) to make up the portfolio.


How do I Follow ASX Income?

We’ve designed this portfolio to be easy to follow with these steps:

  1. Buy: Buy the stocks in the table in equal weights. Weights can drift over time as prices move, but we only recommend re-balancing security weights if they stray too far from the target weight (14.3% per security). The volumes shown in the table are based on a $5,000 investment per hybrid which produces a $35,000 portfolio.
  2. Re-balancing: Now and then, the list of stocks will be updated in what we call a ‘re-balance’. When you subscribe to this portfolio, you will receive the re-balancing notification as they occur. You will need to look at the new list and sell any stocks that are no longer on the list.


Is There a Minimum Investment Period Or Amount?

Our analysts recommend a time horizon of at least three years for ASX Income due to the long-term nature of the securities held. Many of the hybrids held have maturity dates five years or more into the future, so it’s best to have a similar timeframe when investing in them. The lower liquidity of these securities also makes it unattractive to trade in and out of them frequently.

While there is no minimum investment amount since the portfolio holds seven stocks the minimum brokerage charged by your broker can put a practical limit on the minimum investment size. For example, if your broker charges a minimum of $10 per trade, this would represent a 0.5% charge on a trade size of $2,000. Due to the low activity of this portfolio, such a brokerage charge would be acceptable but we wouldn’t recommend a lower trade size than this. With seven hybrids in the portfolio, this would be a minimum initial investment of $14,000.


How do Hybrid Securities Work?

While hybrid securities are considered complex financial products, understanding their characteristics can help investors accept and manage the risks associated with them.

The main feature of hybrid securities is that they pay a regular dividend at a predetermined rate (usually an amount above the Australian Bank Bill Swap Rate) which makes the dividend income more predictable than for an ordinary share.

Hybrid securities also have a par value which is the amount that investors would receive back if the issuing company decided to redeem them. This redemption date is specified in the issuing prospectus and in some cases, it can be indefinite (for a perpetual hybrid).

The ASX Income portfolio involves a rigorous selection process. Only securities that pass all of our criteria are included in the portfolio. Based on the characteristics of the securities we hold we can produce some ‘expected’ performance data based on the current yield of these securities. The table below lists some of the characteristics of this portfolio relative to the ASX 200.

Construction Seven of the highest-yielding hybrid securities listed on the ASX Free-float-adjusted market cap weighted, comprising 200 of the largest ASX stocks
Management Changes made infrequently, on average 2-3 trades per year Rebalanced four times per year according to market cap and liquidity
Annual Average Return* 6% per annum, before fees (excluding franking) 8.4% per annum, before fees

*As of 31 December 2018, based on the average yield of the current portfolio



Important notice:

Quantities and calculations in this post use the Rivkin Model and might differ from yours. This post does not constitute an invitation to buy or sell any securities. Before conducting any transaction, make sure you fully understand the terms of the product and the relevant risk factors involved. You can seek professional advice to determine the appropriateness and cost of any transaction from the broker you use.

To learn more about how we calculate performance click here.


This portfolio requires investing in Hybrid Securities. Hybrid Securities are considered complex financial products. Please read ASX’s “Understanding Hybrid Securities” document before considering an investment in hybrid securities. You can also search our site to understand more about the benefits and risks of investing in ASX-listed Hybrid Securities.

Be the first to know. Get the Morning Market Wrap each morning.