Growth over income?

I manage a SMSF in pension phase and have been reviewing your model Income portfolio with a view to using it as a model for our exposure to the Australian share market.

I also reviewed your model growth portfolio. The main focus of the SMSF is income and it would appear the projected income/franking credits from the growth portfolio is not much lower than the income portfolio. Is my observation here correct? If so I would be comfortable with the income produced by the growth portfolio as it includes more potential for growth.

Regards

 

A: Thanks for the question.

Yes, you are correct in thinking that the portfolios are not that radically different. The income portfolio has a bias to stocks paying higher dividends plus franking, whereas the growth portfolio has an orientation towards stocks which should grow over time. In both cases, the portfolios are not that far away from index to ensure that they will largely perform with the market.

 

Some key characteristic (as at 31 Dec, using Dec 31 share prices and Dec 31 forecasts):

 

Income Portfolio

Forecast PE multiple: 16.1 (if Transurban and Syd Airport excluded)

Forecast Yield: 4.90%

Forecast Franking: 87.4%

 

Growth Oriented Portfolio

Forecast PE multiple: 17.7

Forecast Yield: 4.1%

Forecast Franking: 82.8%

 

Regards


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