In the past 6 months or so I’ve had several conversations with advisers in search of more research and analysis on income producing investments. Dividend rates, dividend consistency, annual yield, projected yield, the list goes on. More and more people are looking for income producing investments and ways of showing the effects of income on a portfolio. These needs have sparked a discussion at Morningstar about how we can help advisers find the best income producing investments and determine the effects of that income on a client’s financial situation. We currently collect distribution payment data for open end funds, investment trusts, ETFs and of course equities. This data is usually not very hard to come by. But there seems to be a need to interpret this data as income that a client has received or might receive should they invest in those investments or in a particular portfolio of investments.
Will the income be enough to cover living costs once a client retires? How reliable is the income stream from an investment? How has the income taken from a portfolio affected the performance of a portfolio of investments over time?
There is also a rapidly growing need for advisers to be able to find the best income producing investments for clients who are approaching retirement or who are already in their golden years. Income consistency, yield rate and underlying stock picks are all important factors when searching for income producers. We see a need for better data and better tools to help advisers identify good quality funds that can be the engines of production at the core of a retirement portfolio.
This discussion is still in it’s early days so if you have any requests or suggestions on what Morningstar can do to improve income analysis please let us know in the comments below.