2016 has seen some major news events (Brexit, the US election) which increased short term volatility in equity markets around the world.
Despite the recent volatility, market returns over the last 12 months to 30 November 2016 have been strong.
- The Australian equities market (ASX 300) has increased by 5.8%.
- Once dividends are included, the total return increases to 6.3%. The current RBA cash rate is 1.50%.
- 59% of ASX 200 companies increased their dividends in the 2016 financial year.
- The average increase in dividend payments compared to 2015 was 4% (compared to inflation of 1.9%).
- The US Dow Jones Index has increased by 7.8%.
For the financial year ended 30 June 2016 the top 6 companies in the Australian equity market (ASX 200 Index) represented greater than 50% of total dividend income paid in the market.
In contrast, the top 6 companies in the international equity market (MSCI World Index) represented less than 10% of the total dividends.
This highlights the importance of holding a mix of assets across Australian and international equity markets to reduce the concentration to single sectors (e.g. financials represents 37% of the ASX200) and increase long term expected returns.