The income strategy hunting ASX stocks at their 'peak dividend' moment

This Fund in Focus was taped on Wednesday 23 October 2024.

ASX-listed Whitefield Industrials (ASX: WHF) was founded in 1923. Now, more than 100 years later, Whitefield is launching a new equity income strategy called Whitefield Income. In the following Fund in Focus, Whitefield Managing Director, Angus Gluskie discusses their differentiated approach to income generation.

Whitefield Income is built around an equity income approach, with a portfolio consisting of ASX 300 stocks. This strategy aims to deliver regular income to investors by systematically investing during optimal periods for income recognition and dividend payments.

Gluskie explains that, within a typical six-month period, income and dividends are not reflected consistently in stock prices but tend to spike as dividends approach. By timing investments to align with these favourable periods, Whitefield Income aims to maximise returns.

“It's an actively managed strategy, which means that we're systematically investing across the universe of ASX 300 stocks with the objective of investing over the periods of time where return generation is most favourable across companies, income recognition and dividend payment periods,” says Gluskie.

Who is this strategy for?

Whitefield’s income-focused strategy is tailored for two types of investors: those interested in regular monthly franked dividends (with an initial target dividend yield of approximately 8% inclusive of franking credits, or around 5.5-5.6% net) and those seeking a different approach to Australian shares.

Unlike other Australian funds that tend to focus on stock-picking or are heavily market-cap-weighted, Whitefield Income systematically targets return opportunities, diversifying its portfolio with 70 to 100 stocks to manage risk more evenly.

Quantitative investment infrastructure

The Whitefield Income process employs a quantitative investment infrastructure, where large amounts of data are analysed to guide decisions, ensuring consistency and rigour.

According to Gluskie, the team continuously monitors and refines the system, occasionally incorporating new data as it becomes relevant to performance.

The portfolio turnover rate is high. Holding periods average around 11 weeks, allowing Whitefield to adjust quickly in response to changing income cycles and ultimately yielding a portfolio turnover rate of about 400% per year. This active approach allows the fund to capture income generation effectively without being locked into long holding periods.

Franking, or tax crediting, remains a priority in the strategy, though Whitefield invests in both franked and unfranked dividend stocks to take advantage of various market opportunities. In cases of unfranked dividends, Whitefield absorbs the tax, allowing distributed income to be franked for investors. This strategic flexibility enables Whitefield to respond dynamically to mispricing in both types of dividend-paying stocks.

Track record

The strategy has a four-year track record in an unlisted fund format, during which it has delivered outperformance. While total returns will fluctuate with the broader Australian market, income generation remains more consistent, which can appeal to investors seeking steady income from a high-quality portfolio of profitable, cash-positive companies.

Furthermore, the strategy is designed to continually adjust to the prevailing economic conditions and opportunities.

“We're orienting the holdings to the stocks and sectors in the Australian economy that are benefiting from the economic conditions of the time.

“It means over time, it will go where income is coming from,” says Gluskie.

Skin in the game

As with Whitefield Industrials, Whitefield’s management team plans to invest in the new fund, underscoring their belief in its potential.

With a strong focus on alignment between management and shareholders, the Whitefield team aims to build on its legacy of delivering value to investors through this new, income-focused fund.

Time codes

0:00 - Intro
0:24 - A little bit about Whitefield
0:38 - What investors can expect from Whitefield Income
2:23 - Who is this strategy for?
3:51 - Investment process and quantitative investment infrastructure
4:30 - Monitoring and enhancement
4:52 - Portfolio turnover and income generation
5:20 - To frank or not to frank?
5:58 - Strategy track record
6:41 - Characteristics of the strategy
7:54 - The new listing
8:10 - Skin in the game
8:36 - How can investors find out more?

Offer Period: 5–26 November 2024

For more info on Whitefield Income (WHI) or to view the Prospectus, visit whitefield.com.au