Stockhead: Capital gains or income? Bailador Technology Investments delivers both
- Bailador’s regular fully franked dividends provide ongoing yields superior to cash
- Investors also get exposure to capital gains associated with investing in high-grow tech
- Bailador’s stated policy is to pay regular ongoing dividends of 4% of NTA per annum
When investing in technology, investors often choose growth over income — but why not have both? Tech-focused capital fund Bailador Technology Investments is delivering competitive dividends and access to capital gains through a selection of high growth companies.
Many Aussie investors appreciate receiving valuable franking credits, whereby tax paid by a company is credited to shareholders when dividends are paid. The credits are factored into calculations when comparing overall returns.
Bailador Technology Investments (ASX:BTI) co-founder and managing partner Paul Wilson says the company’s regular fully franked dividend provides ongoing yield superior to cash, as well as exposure to the main engine of returns for its shareholders, capital gains.
“Factoring in share price appreciation, cash dividends received, and franking credits received, $100k invested in acquiring BTI shares at the start of the 2021 financial year is worth $203k today,” he says.
He says the chart below demonstrates; three-year cumulative returns have been generated in order by:
- Share Price Appreciation 78%
- Cash Dividends 17%
- Franking Credits 8%
“Your biggest return will still come from share price growth, but you get the bonus of cash dividends, which is the second biggest element and some franking credits which is the third biggest element so they all count,” Wilson says.
Source: BTI
Better than cash
The cash yield on BTI shares based on the share price as of August 31, 2023 is 5.3% per annum and the yield grossed up for franking credits is 7.4% per annum.
“For most investors, the grossed up yield of 7.4% pa is the appropriate number to compare to interest rates, which of course are not franked,” Wilson says.
“The BTI yield is markedly superior to cash rates available, so investors are generating a solid ongoing return, while getting the exposure to the potential capital appreciation which is the main focus of the fund.”
He says the BTI dividend policy is fully franked dividends of 4% of net tangible assets (NTA) per annum, payable half yearly.
He says when the BTI share price is lower than NTA, the cash yield will be higher than 4%, as was the case in August.
Dividend payments ongoing BTI policy
BTI’s policy is to continue to pay regular ongoing dividends of 4% of NTA pa.
Wilson says with a cash balance of more than $100 million and franking credits to support fully franked dividends at the current rate for a period of 6.4 years, the policy is intended to endure over a long period.
“We arrived at this policy in June 2022 after careful consultation with a wide range of shareholders,” he says.
“We believe it strikes the right balance of providing a regular tax efficient income stream for investors, while allowing BTI sufficient capital to invest in attractive opportunities likely to generate significant capital gains.
“Generating significant capital gains in the portfolio remains the primary focus of the team, and we are glad to report our confidence that a number of the existing portfolio will do just that.”