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Morningstar Model Income Equity Portfolio: Trade update November 2021

Nimalan Govender  |  30 Nov 2021Text size  Decrease  Increase  |  
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The objective of the Model Income Equity Portfolio is to provide attractive net and gross dividend yields while outperforming the S&P/ASX 200 Accumulation Index over a complete cycle. The portfolio is actively managed and concentrated, mostly consisting of companies with sustainable distributions, franking credits, and trading at discounts to intrinsic value according to our large research team. All else equal, we also strive to own companies with economic moats, as high-quality companies tend to provide attractive returns with reduced volatility. Total return will generally be driven more by income than capital appreciation, although both are desirable.

Trade analysis

We have made a range of trades on the portfolio.

The rationale for the trades is provided below. Substantially more analysis on every portfolio holding is available through Morningstar Equity Research.

Trade summary

table

All data and information as Portfolio Date: 11/10/2021

 

Growthpoint Properties Australia: Added

Growthpoint (ASX:GOZ) is a real estate investment trust that specialises in the ownership and management of a range of office and industrial properties across Australia. Despite the company trading around our fair value assumptions, the yield remains compelling for this income-focused portfolio.

Inghams Group Limited: Added

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Inghams (ASX:ING) is involved in production and sale of chicken and turkey products and stockfeed. The company is a large vertically integrated player in the Australian and New Zealand market with import restrictions helping to protect the duopoly market structure. Supported by encouraging consumer trends (favouring protein consumption and easy to prepare meals), the company is reasonably priced, while the strong fully franked yield appeals for this income-focused portfolio.

Aurizon Holdings Limited: Increased

Aurizon (ASX:AZJ) is Australia’s largest freight rail operator, primarily transporting bulk commodities, such as coal, iron ore and agricultural products. It also owns and operates the largest coal rail track network in Australia, linking a number of mines with ports in Queensland. Despite an improving economic outlook, the company’s share price continues to languish. However, Aurizon is a quality business, in our view. Improving efficiency, being essential transport infrastructure and having reasonable level of debt should ensure steady earnings, except in the most difficult circumstances. In this regard, the current share price (and yield) appeal.

Monadelphous Group Limited: Increased

Monadelphous (ASX:MND) is an Australian engineering group providing construction, maintenance and industrial services to the resources, energy and infrastructure sectors. A weaker iron ore price has affected sentiment toward the company, of late. However, valuations are reasonable, and we take this opportunity to top up our holding, with new expansion projects in the mining and energy fields expected to sustain earnings and dividend growth.

ADBRI Limited; Orora Limited: Removed

These holdings have been removed as Morningstar Equity Research has ceased research coverage on these companies.

is a portfolio manager for MIM Investment Research.

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