Rivkin's Income strategy is a long term buy and hold strategy that selects ASX listed hybrid securities. These can provide investors with a steady income yield with a lower risk of capital loss than ordinary shares.
Latest Update – 03 February 2020
The ASX Income portfolio requires infrequent changes and is, therefore, a ‘set and forget’ type portfolio. All seven of the hybrid securities in the above table are current recommendations, and therefore, investors following this strategy should buy all seven in equal proportions.
Once the next security is redeemed,we will recommend a new hybrid to replace it. To find a replacement, we will search all ASX listed hybrids for the one with the highest yield to maturity that also passes specific other criteria that we evaluate. In the meantime, the above portfolio is currently recommended as a ‘hold’.
Historical updates for ASX Income can be found by clicking here.
|Stock code||Stock name||Qty||Entry date||Entry price||Current price||Current value||Dividends||Return percentage||Years Held||Distribution Rate|
ANZ Bank Hybrids
|47||20 Sep 18||$105.66||$108.14||$5,082.58||$5.60||7.65%||1.0|
Commonwealth Bank Hybrids
|47||28 Mar 17||$106.00||$105.55||$4,960.85||$13.38||12.20%||2.0|
Challenger Capital Notes
|48||16 Apr 18||$102.75||$104.03||$4,993.44||$7.47||8.52%||1.0|
|53||15 Jun 15||$93.54||$101.90||$5,400.81||$26.46||37.23%||4.0|
Macquarie Capital Notes
|46||21 Dec 15||$106.50||$105.51||$4,853.46||$22.82||20.50%||4.0|
|46||23 Jan 18||$108.00||$106.09||$4,880.14||$9.30||6.84%||2.0|
|49||6 Jan 20||$100.32||$101.55||$4,975.95||$0.00||1.23%||0.0|
*Quantities are based on investing $5,000 per security on the entry date
Although hybrid securities can be considered complex financial products, an understanding of their characteristics can help investors accept and manage 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) that makes the dividend income more predictable than for an ordinary share. Hybrid securities also have a par value which is the amount that in investor 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).
Rivkin selects the top seven hybrid securities based on their yield to maturity and includes them in the Income portfolio. Some additional criteria (such as liquidity and an aversion to holding more than one hybrid per issuer) can also come into the ranking process.
How To Follow This Strategy
Rivkin’s strategies are designed to be as easy as possible for investors to follow. To follow the ASX Income strategy, investors need to buy the securities in the above 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 this table are based on a $5,000 investment per hybrid which produces a $35,000 portfolio.
Now and then, the list of stocks will be updated in what we call a ‘re-balance’. This means investors will need to look at the new list and sell any stocks that are no longer on the list. After these stocks are sold, the new stocks from the current table can be bought.
About The Strategy
The ASX Income strategy was developed by Rivkin during 2015 and was rolled out as a strategy to clients in 2017. Please click here to find out more about the strategy.
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