Portfolio Update: February Dividend Harvest

28th January 2025

Portfolio Update: Challenger Limited (CGF.ASX)

Across the Australian Equity component of investor portfolios (Income Tilt) we have bought Challenger Limited (CGF.ASX).

Challenger has 2 main divisions:

Challenger life – which provides a variety of annuity products to retail and institutional investors.
And The funds management division which operates 2 main brands – Fidante and Challenger Investment Management (CIM).

We are attracted to Challenger for the following reasons:

Their dominant market position in Australian retail annuities
The abundant future opportunities and demographic tailwinds for annuity products
And Challenger’s strong funds management business.

Challenger has three key levers for value creation:

An improving rate of return on annuities
Growth in the funds management business
And the federal government’s support for annuities in retirement

Firstly as global interest rates and bond yields have increased, the rate of return offered on Challenger annuities has improved significantly

Secondly, the ongoing growth in funds management and expansion of products will drive earnings growth and generate capital to invest in the annuities business.

And finally the Australian government is pushing for increased use of annuities as Australians transition into retirement. This should expand the market and drive innovation in income stream products over the long term.

We have funded the purchase of Challenger via sale of Transurban (TCL.ASX).

In addition to this we are repositioning the portfolio to increase income generation in the upcoming reporting season. We are increasing your holdings in Rio Tinto (RIO.ASX), Sonic Healthcare (SHL.ASX), Telstra (TLS.ASX) and Woodside (WDS.ASX). This will be funded by reducing the weight of APA (APA.ASX), Dexus (DXS.ASX) and Mirvac (MGR.ASX) which paid dividends in December.

As always, thank you for your ongoing support, it is very much appreciated. If you have any questions or would like more information, please contact your adviser.

Warnings and disclosures

This material has been prepared for general information purposes only and not as specific advice to any particular person. Any advice contained in this material is General Advice and does not take into account any person’s individual investment objectives, financial situation or needs. Before making an investment decision based on this advice you should consider whether it is appropriate to your particular circumstances, alternatively seek professional advice. Where the General Advice relates to the acquisition or possible acquisition of a financial product, you should obtain a Product Disclosure Statement (“PDS”) relating to the product and consider the PDS before making any decision about whether to acquire the product. You will find further details of the service we provide and any cost to you within the Financial Services Guide. Any references to past investment performance are not an indication of future investment returns. Prepared by EP Financial Service Pty Ltd ABN 52 130 772 495 AFSL 325 252 (“Elston”). Although every effort has been made to verify the accuracy of the information contained in this material, Elston, its officers, representatives, employees and agents disclaim all liability (except for any liability which by law cannot be excluded), for any error, inaccuracy in, or omission from the information contained in this material or any loss or damage suffered by any person directly or indirectly through relying on this information.