Dividend and Retirement Investment Advice for Retirees

Tuesday, October 17, 2023

Retirees who are drawing an income on their retirement investment have the opportunity to maintain their capital via dividend payments into their investment, as well as the increased capital value of their holdings.

A stock or share price represents a public company's market valuation per share - each share represents a unit of company ownership. 

One of the values of investing in managed funds is you can receive dividends (also known as distributions) on the shares you hold. Dividends paid to shareholders, are paid based on the performance and profit of the company throughout the year.

These distributions are a key method to increase the value of your investment portfolio and retirement investment plan over time, if you choose to reinvest them into your portfolio.

In addition, well made investments will lead to capital gains on the shares. This means an increase in value of the shares you hold as a result of the company’s performance and growth over the year. 

When are distributions paid?

Distributions may be paid on a quarterly basis, or half yearly basis. The timing will be outlined in the relevant Product Disclosure Statement.

How do distributions affect unit prices?

When you invest in a managed fund you will own units in that fund.  For example if you invest $1,000 into a fund at the unit price of $2.50 you would own 400 units in that fund.

Around the time a distribution is payable to unitholders, the unit price of the fund will fall by the same value of the announced distribution. For example, if a fund has a unit price of $2.50 on 30 June and declares a distribution of $0.25 per unit, the unit price will drop to $2.25. So temporarily your total investment will appear to reduce.

If you are invested in the fund on the date that the distribution is payable, you are entitled to a share of that distribution. Using this same example (unit price of $2.50 with a declared distribution of $0.25 per unit) you would be will be entitled to receive 25c per unit or $100 (for your 400 units). Once these are paid your total investment value will readjust.  

Distribution payments can take the form of a deposit to the cash account of your investment, or as additional units purchased within the same investment (known as reinvesting).

What are the benefits of these distributions to retirees?

Distributions are the basis of compounding the value of your retirement investment. In this example you started with 400 units, and if you chose to reinvest your earnings of $100, you would end up with 440 units. Subsequently, as the value of the share price increases, so does the value of your investment.

In this way, retirees who are drawing an income on their investment, have the potential to maintain their capital to a degree, via these dividend payments into their investment, as well as the increased capital value of the units.

Contact us for Dividend and Retirement Investment Advice for Retirees

This is a complex subject and one best stepped through with your retirement financial planner. For specialist financial retirement planning expertise and to benefit from investment advice for retirees, please contact Maher Digby Securities on the Sunshine Coast.

For more Information contact Mark Digby at Maher Digby Securities Pty  Ltd - Financial Advisers – AFSL No. 230559. This document was prepared without taking into account any person’s particular objectives, financial situation or needs. It is not guaranteed as accurate or complete and should not be relied upon as such. Maher Digby Securities does not accept any responsibility for the opinions, comments, forward looking statements, and analysis contained in this document, all of which are intended to be of a general nature. Investors should, before acting on this information, consider the appropriateness of this information having regard to their personal objectives, financial situation or needs. We recommend consulting a retirement investment financial adviser.