Djerriwarrh's approach is built on over 30 years of investment experience, including the use of option strategies to enhance income.
Higher Yield than the ASX 200
One of the key components in the Company’s ability to pay a high yield is its approach to selling options over a diversified portfolio of Australian equities. In undertaking this activity the Company may give up some capital growth as options are exercised, although Djerriwarrh will seek to buy back options when it is financially attractive to do so to minimise the sales of shares through the exercise of call options.
Low Cost and no performance fees
Investing in Djerriwarrh provides access to the option writing capabilities of the investment team at a low cost and no performance fees. The cost of running the Company for the year to 30 June 2023 was 0.40% ie. $0.40 cents for each $100 invested or $4.00 for each $1,000 invested.
Long Term Investment Performance
We aim to provide shareholders with a higher yield than the market as well to provide attractive total returns over the medium to long term. The use of options will however typically reshape the profile of returns producing more immediate income at the expense of potential capital growth.
One of the key components in the Company’s ability to pay a high yield is its approach to selling options over part of its investment and trading portfolio. This generates current income from the option premium Djerriwarrh receives for selling the options.
The amount that the Company receives from selling options depends on a number of factors:
- level of volatility in share price anticipated for the underlying stock
- level of the option exercise price and particularly how far it is from the current share price.
- time to expiry, i.e. how far the option has to run.
- level of interest rates, the lower interest rates are, other things being equal, the lower the option premium received.
- the percentage of the portfolio over which we are prepared to sell options.
In an environment where the Company believes the market is more likely to rise, then we would tend to have a lower level of the portfolio covered by options to give the company more exposure to any lift in the capital value of our investments.
Djerriwarrh is an LIC with a long-term investment approach. Learn more about how Djerriwarrh works below.
We are a listed investment company (LIC)
LICs have a fixed number of shares which are traded on the Australian Securities Exchange. The closed-end nature of the fund enables a focus on long-term portfolio performance without having to deal with funds moving in and out of the portfolio due to changes in investor sentiment.
Long-term investment approach
We invest in companies that typically have high quality businesses and that are financially sound. It is our view that such businesses generate superior returns over the long-term. This approach has historically produced attractive returns and fully franked dividends over time for shareholders.
How we invest
Djerriwarrh has an experienced investment team that actively reviews current and potential investments across a broad range of companies. When selecting investments for our portfolio we look for a strong management and board, sustainable competitive advantage and sound financial metrics, including return on investment, profit margins, cash flow and acceptable levels of debt. This approach leads to a portfolio which is typically between 50 -70 companies, most of which have an active options market in their shares.
Enhanced dividend income
Djerriwarrh receives dividends from the companies it invests in as well as other income. The Company pays out a high percentage of operating profits as fully franked dividends. Dividends are able to be sourced from current year profits, retained profits and profits from the sale of investments. Fully franked dividends are paid twice a year.
Shareholders can choose to reinvest these dividends via the DRP to grow their investment over time.
What is a franked dividend?
When shareholders receive a franked dividend it means they are potentially entitled to a rebate on the tax already paid by the companies Djerriwarrh invests in. Franking credits attached to the dividend are sometimes known as imputation credits.
Approach to Environment, Social and Governance Issues
Assessment of Environmental, Social and Governance (ESG) issues is an important part of our investment process. As a long-term investor, we seek to invest in companies that have strong governance and risk management processes, which includes consideration of environmental and social risks. We regularly review companies to ensure ongoing alignment with our investment framework.
More details are in the attached document.
Environmental, Social and Governance (ESG) Issues When Investing
You invest in Djerriwarrh by buying shares on the Australian Stock Exchange (ASX). There are no subscription forms required by Djerriwarrh, but you will need to open an account with a broker.
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Choose a broker
There are two main types of brokers. Full-service stockbrokers are a dedicated stockbroker that will typically offer a broad range of services including general advice. Full-service stockbrokers may charge a higher brokerage fee than online brokers. Share Trading Platform (Online Broker). These are non-advisory, share-trading platforms that gives you access to buy and sell shares online, typically for a lower cost per trade. Most major financial institutions have online brokering services.
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Purchasing Djerriwarrh shares (Trade)
Once you have set-up your broker account and have funds available in your broker account, you are ready to buy shares in Djerriwarrh (ASX code: DJW). There is no set limit on the number of DJW shares you may purchase, however your broker may apply a minimum amount (typically $500). You can purchase (and sell) Djerriwarrh shares as often as you would like, but please be aware of the cost of brokerage that is charged by your broker.
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Post Trade
Once you have become a shareholder in Djerriwarrh you will receive a welcome letter from our share registrar, Computershare, with details including your Holder Identification Number and how to update your bank details (to receive your dividend) or participate in the Dividend Reinvestment Plan (DRP).