I invested a fair chunk of money into the Betashares Dividend Harvestor Fund (HVST), and while this fund pays great monthly dividends (approx 14% now), its price performance is lacking, as the chart below shows. (Read The Problem with HVST.)
HVST price as of 12 March 2018 – Source: Bloomberg
To address this issue, I have simply opted for a 50% dividend reinvestment plan, which will see half the dividends go back into buying units in the ETF in order to maintain value. Assuming HVST continues to pay 14% yield and that 50% DRP is enough to prevent capital loss, HVST still provides 7% monthly distributions, which in my opinion is fairly good. Generating sufficient monthly distributions is very convenient for those who live off dividends as waiting three months for the next dividend payment can seem like a long wait.
However, Betashares have now introduced two new ETFs on the ASX (EINC and RINC) based on existing managed funds from fund manager Legg Mason. Based on the performance of the equivalent Legg Mason unlisted managed funds, these ETFs are very promising for those who live off passive income. These ETFs have high dividend income (around 6 to 7 percent yield) paid quarterly, and based on past performance at least, there doesn’t seem to be any issue with loss of capital.
RINC (Betashares Legg Mason Martin Currie Real Asset Income ETF) derives its income from companies that own real assets such as real estate, utilities, and infrastructure whereas EINC (Betashares Legg Mason Martin Currie Equity Income ETF) derives its income from broad Australian equities.
The expense ratio of 0.85% is on the high side but not unsual for this type of fund (income focussed and actively managed). Another potential risk to consider is the impact that rising interest rates can have on many of these investments, especially “bond proxies,” into which RINC and EINC seem to invest exclusively.
I Live Off Dividends 
Yeah I saw these ones too and they appeal. They specifically focus on growing the income stream which I like. It would be wrong to assume that price performance will necessarily always be positive however as the simple equation of Total Return=Capital Return + Income Return means that should income be more than the performance of the underlying portfolio the capital return will be negative. I think it’s really important to always look at income paying investments on a TOTAL RETURN, not capital return basis
LikeLike
As you know I am no fan of how HVST operates or how Betashares have gone about trying to explain their way around its failings.
The DRP reinvestment plan doesnt work for me as I am not prepared to commit a large amount of capital to what I see is a yield trap. I did like the monthly dividends but the capital loss is too great for me even with the DRP . Its a annuity in disguise IMO.
RINC and EINC look interesting but I will be having a good look at how constant the yield is and if the price holds up over time before I would invest. Not so worried about the bond proxy issue with interest rate rises, I think they are a bit overstated by Fund Managers etc, interest rates will continue to remain low IMO for a while yet.
I remain skeptical on Betashares products in general even though I hold YMAX, UMAX but probably prefer Vanguards VCF,VHY or some of the Wilson LIC’s that pay 6% plus franking and grow your capital/dividends all be it with higher fees.
LikeLiked by 1 person
A year in HVST (which fortunately I cut my losses and ran from) and watching Betashares stream of new products , convinced me that their business model was to come up with new shiny ideas that look attractive but are ultimately fraught with risks to the unsuspecting investors who pile into each one as it is offered. I also hold UMAX still but that has been a serial underperformer and I am looking to get out. In general I steer clear of Betashares as a product provider. I am with the other reviewer on here in preferring Vanguard.
LikeLiked by 1 person
Hey Calvin,
Getting in touch on behalf of Stake and its founder Matt Leibowitz about potential opportunities to collaborate in the coming months.
Would be great if you could email me at adam@slingstone.com and we can go from there 🙂
LikeLike