EIGA aims to deliver an attractive level of income, paid by regular monthly distributions. This income is generated by investing in an actively managed portfolio of dividend paying Australian shares.
While income levels will vary over time depending on the level of dividends generated by the underlying stock portfolio, we generally expect to deliver an income yield of around 7% per annum.
This 7% yield comprises around 5% per annum in cash, paid in equal month installments plus an additional 2% per annum in franking credits allocated at the end of the financial year. The 7% target is based on the EIGA unit price at the start of each financial year.
The table below shows the outcomes for the 2020 financial year just passed as well as our current expectations for the 2021 year just started.
At the start of the 2020 financial year, the EIGA unit price was $3.90. Over the course of the year, the Trust paid distributions of 1.72 cents per unit each month, totaling 20.6 cents per unit for the year. This equates to a cash yield of 5.3% based on the opening unit price. In addition, unitholders received franking credits of 7.5 cents per unit, equating to a franking yield of 1.9% based on the unit price at the start of the year. Combined, this brought the total pre-tax distribution income yield to 7.2%.
Looking to the current year, the market due to factors such as COVID, and expectations are for market dividends also to be lower. The unit price has also fallen, starting the year at $3.19. Applying our income targets of 5% cash plus 2% franking to this lower base sees us forecasting monthly distributions and franking credits to be approximately 20% lower in the current year. It is important to note however, that actual outcomes may vary based on market conditions.
|Financial year - 2020||Actual||Financial year - 2021||Forecast|
|Unit Price at the start of the financial year||$3.90||Unit Price at the start of the financial year||$3.19|
|Monthly cash income distribution - cents per unit||$0.017||Monthly cash income distribution - cents per unit||$0.013|
|Annual cash income distribution - cents per unit||$0.206||Annual cash income distribution - cents per unit||$0.161|
|Annual cash income yield||5.3%||Annual cash income yield||5.0%|
|Franking credits allocated at the year end - cents per unit||$0.08||Franking credits allocated at the year end - cents per unit||$0.06|
|Annual franking yield||1.9%||Annual franking yield||2.0%|
|Annual pre-tax income yield||7.2%||Annual pre-tax income yield||7.0%|
Disclaimer: Please note that these are the views of the writer, Stephen Bruce, of eInvest and is not financial advice. To find out how to invest in our active ETFs, visit here. The product disclosure statement and more can be found at www.einvest.com.au
Past performance is not a reliable indicator of future performance. No person guarantees the future performance or distribution yield of the eInvest Income Generator Fund or that the investment objectives of the Fund will be achieved.
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