Crankys Nest Egg

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Share Portfolio With Dividend Yield Over 7%

I don’t always talk about investing at social events. Really - I don’t. But the other night the topic came up and, well, I couldn’t help myself.

You see, an old friend of mine (let’s call him Eric) was telling me about how he uses a managed fund to juice up his investment returns. Eric said the managed fund paid a dividend yield of over 5%.

I’m not really a fan of the cost structures of managed funds so I asked him how much of that 5% the manager was taking in fees. After a little further discussion, he admitted that he wasn’t sure what management fee he was paying to the fund manager.

Anyway, as Eric knows I prefer buying shares directly he lay down the challenge as to what dividend yield I was able to achieve on my portfolio. I explained that I wasn’t a dividend investor per se (and I had no idea off-hand what the dividend yield of my portfolio was) but that I thought I could put together a list of companies which in aggregate yield over 5%.

So today I had some time to kill and decided to see what I could find. What follows is a list of companies which in aggregate would yield over 7%.

ASX Code Company Name Price Franked Dividend Coverage Forecast Yield
ACR Acrux 0.655 Yes 1.42 9.2%
CSR CSR 3.1   1.16 7.1%
CWP Cedar Woods Prop 4.02 Yes 2.35 7.0%
IFL IOOF Hldgs 8.96 Yes 1.22 6.3%
MND Monadelphous Grp 7.47 Yes 1.2 7.7%
PPT Perpetual 43.25 Yes 1.14 5.8%
SMX SMS Management 2.05 Yes 1.36 7.3%
  Average Yield       7.2%

The list only contains 7 shares, which is not quite as diversified as I would like, but it’s good enough for our purposes.

How to find high dividend shares

What is more important than the actual shares on the list is the process used to select them.

I was looking for shares which:

  • were in the ASX300 index
  • had a yield over 5%
  • were profitable
  • had a sustainable dividend
  • had low debt
  • were from a diverse group of industries

In the ASX300

This criteria was meant to leave us with larger, more established companies. In theory these companies should have more stable earnings. In practice this may not always be true, so we will apply a number of other criteria.

A dividend yield over 5%

5% is somewhat arbitrary, but came from the satifaction which Eric expressed as a result of receiving an income yield of over 5%.

There are a number of other shares which could have made it onto this list based on yield alone. Telstra and the big four banks all would have made the list on this criteria alone, however they were knocked out by their debt.

Low debt

All of the companies must have low debt. This was measured by a debt/equity ratio of less than 20%.


All of the candidates had to have positive earnings in the most recent reporting period.

A sustainable dividend

I wanted to make sure the dividend had a reasonable chance of being maintained in the years to come. This was measured using a dividend coverage ratio of over 1. This means they were making at least enough money in profits each year to pay out the dividend.

Diverse industries

The ASX300 is particularly weighted towards financials. I wanted to get away from that. However, I still ended up with 2 financial services companies.

ASX Code Company Name Industry
ACR Acrux Pharmaceuticals & Biotechnology
CSR CSR Materials
CWP Cedar Woods Prop Real Estate
IFL IOOF Hldgs Diversified Financials
MND Monadelphous Grp Capital Goods
PPT Perpetual Diversified Financials
SMX SMS Management Information Technology

I don’t actually own any of the shares on this list. However, I’m looking forward to seeing how they perform when compared to the ASX300.

And now the disclaimer. While I made every effort to make sure the data included in this post is correct, do your own research. Also didn’t do any qualitative research on any of the shares on the list. Please don’t treat any of this as a recommendation.

Finally, over to you eric. What do you think?