18 Nov 2020
By 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.
Minimum Investment Amount and Period
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Period
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| Stock code | Stock name | Sector | Current price | Return 12m | Mom rank |
|---|---|---|---|---|---|
NVDA | NVIDIA Corp | Information Technology | $549.46 | 214.71% | 1 |
AMD | Advanced Micro Devices Inc | Information Technology | $84.48 | 199.75% | 2 |
DXCM | DexCom Inc | Health Care | $374.89 | 177.95% | 3 |
ETSY | Etsy Inc | Consumer Discretionary | $134.56 | 144.28% | 4 |
AAPL | Apple Inc | Information Technology | $113.16 | 113.35% | 5 |
REGN | Regeneron Pharmaceuticals Inc | Health Care | $581.64 | 107.25% | 6 |
SWKS | Skyworks Solutions Inc | Information Technology | $147.27 | 101.64% | 7 |
WST | West Pharmaceutical Services I | Health Care | $290.33 | 100.43% | 8 |
NOW | ServiceNow Inc | Information Technology | $491.54 | 99.52% | 9 |
PYPL | PayPal Holdings Inc | Information Technology | $191.66 | 97.47% | 10 |
NFLX | Netflix Inc | Communication Services | $505.87 | 96.81% | 11 |
QRVO | Qorvo Inc | Information Technology | $131.08 | 89.28% | 12 |
AMZN | Amazon.com Inc | Consumer Discretionary | $3,099.96 | 88.02% | 13 |
ADBE | Adobe Inc | Information Technology | $478.98 | 87.32% | 14 |
CTLT | Catalent Inc | Health Care | $88.85 | 83.45% | 15 |
Income Strategy
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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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.
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Hi. The IAGPD has been in a trading halt since at least mid-yesterday. Can you give any further information on what this means or when it lifts? Thanks
Hi Jenny,
Please see today’s article on the IAGPDs. The short answer is that IAG is conducting a capital raising so the IAGPDs should trade in a couple of days.
Regards,
Shannon Rivkin
Hi Guys, what would you think of buying CWNHB at around $95 and a possible 5% gain, or are there too many risks and better deals around?
Hi Dennis,
I am comfortable buying CWNHB at these levels. Despite the issues the company is facing, the balance sheet is rock solid and its assets are worth significantly more than their debts. I think there is a high chance we see the CWNHBs redeemed at their call date next October (assuming no unforeseen issues for the company). And if CWN is forced to sell Barangaroo because it can’t operate the casino then the balance sheet will be in even better shape.
Regards,
Shannon Rivkin
Thanks Shannon.
Ca you please add the franking percentage to the table. Is the yield shown before or after franking?
Hi Stuart,
For some reason, I have only just seen this comment. The yields in the table include franking, and your suggestion to include franking per hybrid is a great idea, and I will pass this on to the IT team.
Regards,
Shannon Rivkin
Does the APRA announcement re future dividend payments from banks also apply to hybrid distributions,
Hi Michael and Lisa,
This is a recommendation by APRA but it is highly unlikely the banks cut dividends completely. As long as they pay even $1.00 in dividends then the hybrids will also receive their full distributions.
Regards,
Shannon Rivkin
Thanks,much appreciated
It seems this table no longer shows the yield?
Hi Stuart,
Adding yield to the table is in our list of upgrades that will be implemented in the coming weeks.
Regards,
William
Nor franking percentage…