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PacReef Income Today Portfolio
March 2016 Quarterly Review
The PacReef Income Today Portfolio returned -0.81% compared to the benchmark (ALL ORDINARIES (TR)) return of -2.35% giving a relative performance of 1.54% for the period.
| Return % | One Month | Three Month | Six Month | One Year | Three Year | Since |
| Portfolio | 3.11 | -0.81 | 7.93 | N/A | N/A | 0.91 |
| Benchmark | 4.74 | -2.35 | 4.11 | -8.03 | 5.63 | -9.09 |
| Relative Performance | -1.63 | 1.54 | 3.82 | N/A | N/A | 10.00 |
The table above sets out the investment performance returns (AFTER investment management fees, but BEFORE administration fees, performance based fees and taxes) for the Portfolio. The performance returns have been calculated on a daily basis taking into account brokerage costs, and are accumulated for the period shown. Returns are shown as annualised if the period is over 1 year, or as total returns otherwise.
The above performance figures do not take into account the potential benefit of the Franking Credits generated by the portfolio. PacReef Asset Management has estimated that if Franking Credits are factored in the PacReef Income Today Portfolio then the portfolio would have potentially returned 3.47% during the month of March, 0.02% during the March quarter, 9.21% during the half-year and 3.36% since inception.
This gives a relative performance of -1.27%, 2.37%, 5.10% and 12.45% respectively for the month, quarter, half-year and since inception.
Volatility has been the main story of market this Financial Year. In the first three quarters we have seen the benchmark return -5.79%, +6.62% and -2.35% with the net result being an overall return of -1.92% for the Financial Year to Date.
This volatility can cause those that have “invested”, or rather speculated, with the objective of achieving capital growth many sleepless nights. However, those that have genuinely invested to generate an income should see this volatility as presenting opportunities to purchase high quality income streams at low prices.
We encourage you to remember three things, not only during volatile times but at all times when investing:
The above three statements are paraphrased from Warren Buffett, Peter Thornhill and Glen Killen respectively.
The latest Reporting Season has only re-enforced our belief that the securities we hold in the portfolio are well positioned to provide a growing income stream for our investors.
Dividends Paid or Declared during the March quarter
| ASX Code | Security | Latest Gross Dividend / Share | Gross Dividend / Share pcp | Change |
| AHG | Automotive Holdings Group Ltd | $ 0.136 | $ 0.129 | +5.4% |
| ASX | ASX Limited | $ 1.416 | $ 1.319 | +7.4% |
| CBA | Commonwealth Bank of Australia | $ 2.829 | $ 2.829 | N/C |
| CCL | Coca-Cola Amatil Limited | $ 0.311 | $ 0.291 | +6.9% |
| COH | Cochlear Limited | $ 1.571 | $ 1.035 | +51.8% |
| CSL | CSL Limited | $ 0.8147 | $ 0.7438 | +9.5% |
| EVT | Event Hospitality & Entertainment Ltd | $ 0.286 | $ 0.229 | +25% |
| GUD | G.U.D. Holdings Limited | $0.286 | $ 0.286 | N/C |
| GXL | Greencross Limited | $ 0.129 | $ 0.114 | +13.2% |
| IVC | InvoCare Limited | $ 0.318 | $ 0.296 | +7.4% |
| JBH | JB Hi-Fi Limited | $ 0.90 | $ 0.843 | +6.8% |
| SKI | Spark Infrastructure | $ 0.06 | $ 0.0575 | +4.3% |
| SUN | Suncorp Group Limited | $ 0.426 | $ 0.543 | -21.5% |
| TGA | Thorn Group Limited | $ 0.079 | $ 0.071 | +11.3% |
| TLS | Telstra Corporation Limited | $ 0.221 | $ 0.214 | +3.3% |
| TRS | The Reject Shop Limited | $ 0.357 | $ 0.236 | +51.3% |
| WES | Wesfarmers Limited | $ 1.30 | $ 1.271 | +2.3% |
Due to the diversification of the portfolio the 21.5% decrease in Suncorp’s dividend, represented only a 0.6% decrease in the portfolio’s overall income year on year. This is easily compensated for by increases in the dividends paid by other holdings within the portfolio.
Across the above 17 securities there was a weighted average increase in dividends of 6% compared to the Previous Corresponding Period (pcp). This represents an increase in income of approximately 3 times the rate of Inflation (CPI).
Only one company reduced its dividend and a further two maintained their dividends the same as the previous year. This means that 82% of the securities held, and which reported during the March quarter, increased their dividends.
Consider this question: Of the people you know, who are still working, how many of them received a pay rise of 6% or more in the past 12 months?
For the Financial Year to Date, the PacReef Income Today Portfolio has generated a gross income of 5.7% and has been greater than 80% franked. This is in line with our objective of producing a tax effective income stream for our investors.
Whilst nothing can be guaranteed in the future, we feel reasonably confident that the securities held in the PacReef Income Today Portfolio will increase their dividends on more occasions than they reduce them.
| Company Name | Sector |
| WESFARMERS LIMITED ORDINARY | Consumer Staples |
| TELSTRA CORPORATION. ORDINARY | Telecommunication Services |
| COMMONWEALTH BANK. ORDINARY | Financials |
| WESTPAC BANKING CORP ORDINARY | Financials |
| EVENT HOSPITALITY ORDINARY | Consumer Discretionary |
Australian business appears to be moving on from the mining downturn with the February 2016 NAB Business Confidence Survey recording a rebound in business conditions which suggests the non-mining recovery has not wavered. Business conditions have improved in the mining states of Western Australia and Queensland and have hit a level that is well above the long-run average.
Mr Alan Oster said “Another above-average outcome for business conditions is a great result in the current global environment. It confirms that low interest rates and more competitive AUD are clearly having the desired effect”.
This rebound in business confidence, together with infrastructure projects that are planned by the various levels of Government gives us confidence that the Australian economy will continue to grow at a modest rate. This should see monetary policy remain on hold for the time being and the chances of a cut in Australian interest rates decreasing. The biggest risk factors to this economic growth, as we see it, are global factors impacting our non-mining sector and a strengthening of the Australian dollar.
Lastly, the potential of a double dissolution election this year will create an element of uncertainty particularly with current polling indicating the result of such an election could go either way. We also have no clear economic direction from the current Federal Government, which is potentially holding back some investment by business. Hopefully, the May budget will clarify the direction the Turnbull Government is heading in a number of areas including negative gearing, Superannuation and Capital Gains Tax.
Prepared by HUB24 Custodial Services Ltd (ABN 94 073 633 664, AFS licence No. 239 122) ("the Operator” of HUB24 Invest (the Service)) and (("the Promoter” of HUB24 Super (the Fund))". The information contained in this document is not intended to be a definitive statement on the subject matter nor an endorsement that this Portfolio is appropriate for you and should not be relied upon in making a decision to invest in this Service or Fund.
Financial commentary contained within this report is provided by PacReef Asset Management Pty Ltd (PacReef Asset Management Pty Ltd (ABN 95 601 146 525), who is the Portfolio Manager of this Portfolio.
The information in this report is general information only and does not take into account your individual objectives, financial situation, needs or circumstances. No representations or warranties express or implied, are made as to the accuracy or completeness of the information, opinions and conclusions contained in this report. In preparing this report, HUB24 has relied upon and assumed, without independent verification, the accuracy and completeness of all information available to HUB24. To the maximum extent permitted by law, neither HUB24 or its directors, employees or agents accept any liability for any loss arising in relation to this report.
The suitability of the Service or Fund to your needs and the suitability of a particular Investment Choice depends on your individual circumstances and objectives and should be discussed with your Adviser. Potential investors must read the FSG and IDPS Guide and/or Super PDS along with any accompanying materials.
Investment in securities and other financial products involves risk. An investment in a financial product may have the potential for capital growth and income, but may also carry the risk that the total return on the investment may be less than the amount contributed directly by the investor.
Past performance of financial products is not a reliable indicator of future performance. HUB24 and the Trustee do not assure or guarantee the performance of any financial products offered. Information, opinions, historical performance, calculations or assessments of performance of financial products or markets rely on assumptions about tax, reinvestment, market performance, liquidity and other factors that will be important and may fluctuate over time.
HUB24, its associates and their respective directors and other staff each declare that they may, from time to time, hold interests in Securities that are contained in this Service or Fund.
