Plato Income Maximiser Limited (PL8) Earnings Call Transcript & Summary

Okay, good morning, fellow shareholders, and welcome to the Plato Income Maximiser Full Year 2024 Results Conference Call. We appreciate you dialing in on a Friday morning, on what looks like a very spring-like day, here in Sydney, anyway. We thank you for your time this morning. My name is Chris Meyer. I'm a Director of PL8. I'm also an employee of Clinical Investment Management. We are the distribution partner for PL8, and we handle a lot of the investor relations for the company. I'm joined today by Dr. Don Hamson. Many of you know him, he's the portfolio manager of your portfolio in PL8, he is also a fellow Director on the Board of PL8. And the main event today: So there's 2 parts to this presentation. I will run through very quickly just the results for the 12 months to June of the company. But really, I think what most of you want to hear is Don's view on the market. And I guess, in particular, the results season from the ASX 200 companies that were sort of in the middle of, maybe at the tail end of, so it's hot off the press. We'll flick through some slides. These slides are available also to you on the PL8 website and the ASX; if you wanted to grab them from there. And we will endeavor to also get you a replay of this presentation by the end of today. If you do have a question, please dial it -- please punch it into the Q&A box. I can see some of you have already put in some questions there. Okay. So without further ado, let me get straight into the presentation just on the company. As I said, it's the 12 months to June of this year. The market was up a bit. The portfolio as a result was also up a bit, about as much as the market, you can see in the middle of that table portfolio and market up about 13.6% including franking. That drove a pretty substantial profit for the company, which is very handy in terms of the profits reserve in order to -- which is relevant in order to pay a distribution out of the company. And on the far right-hand side, you can see there, we have paid dividends at a pretty steady rate of just over that $0.05 per month at $0.055 per month, which translates to $0.066 per annum. And if you convert that to a yield, it's 7.8%, including franking. So a very healthy level of income, which is, I'm sure, why the bulk of you are invested in PL8. And those final 2 bullet points really is a good reminder of the twin objectives of PL8, the first one being to beat the benchmark or beat the market, from a total return standpoint, and you can see there for the year, we equaled the benchmark. But since inception, we've been slightly ahead of benchmark. That's the first objective. The second objective is to beat the income of the benchmark. And you can see there a reasonably substantial 2.3% outperformance to that benchmark since inception and a pretty good year, 2.6% outperformance for the financial year ended June. Some of that can be seen graphically here. So this is the NTA differential between the start of the year and the end of the financial year. So we went from $1.04 to $1.08. I think it's just worth reminding investors that for most listed investment companies the light blue bar is the change in the market or the change in the portfolio, plus any outperformance and the big gray bar, dividends paid. Those are the 2 major impacts on an NTA in any given year. And you can see there, as I commented previously, we had an up year, which drove the light blue bar, and we paid a reasonable amount of that performance out as a distribution to shareholders, which is the gray bar. You can see that graphic on this table over here. And so probably the most relevant are the 2 columns on the right, I don't think we need to focus too much on short-term performance, but over 1 year, and this is now to the end of July, just because we're at the end of August. So it's more relevant than showing you something to the end of June. So for the 1 year to the end of July, the total return of the portfolio has been 15.2% and that compares to the benchmark total return, you can see that are 15%. So that's that slight outperformance from a total return standpoint. But you can see the income of 7.8% is 2.7%. That second row from the bottom, 2.7% ahead of the benchmarks income over that period. And if you look at since inception, that income performance of 7.6%, very similar to the excess income performance for the year at sort of 2.3% outperformance. And there, again, you can see in terms of total return 10.1% against the benchmarks 10.1%, in line with the benchmarks since -- or slightly ahead of the benchmark as we showed in the prior slide since inception. This is a bit of a graphical representation just for the last 12 months to the end of July again. The dark blue bar is the cash dividend and the light blue bar is your franking. And that's on the right-hand bar is PL8 and on the left is the market. And so again, you can see the income outperformance of PL8 is driven in part by a higher cash distribution and in part by a higher franking credit that they distribute -- that we distribute to you. Over the very long term, we have discussed the fact that the dark blue bar, which is the portfolio's performance compared to the gray bar, which is the gray squiggly line, which is the market. I think what's probably just worth indicating here is there has been a bit of outperformance, but it's really -- the portfolio is very well correlated to the overall stock market. I think that's what shareholders want from the portfolio is nothing -- no surprises, if you like, related to the market's performance. And then the bottom 2 lines, the dark one being PL8's income distribution, including franking and the bottom one being the market's distribution including franking really just shows that the bulk of the additional return that PL8 has been able to generate has come from that income outperformance over time. This is really a graphical representation of the distributions you've all received on a monthly basis. And so I suppose you can see there over the last, what is that, 2 years just in excess of 2 years, we've been paying income at that $0.55 per month. It's pretty metronomic at that level. I think it's a big benefit of a listed investment company where one of the very few listed investment companies or trusts paying monthly income. And we're the only one that's an Australian equity-based listed investment company paying a monthly distribution. So it takes a bit of time for one to be able to produce such consistent monthly income. PL8, given such a long history and the strength of its balance sheet, can now do that for shareholders. And you'll see we have on the light blue bars on the far right-hand side, committed to pay the next 2 months' worth of income at that same level. Finally, just on the NTA and the share price relative to its NTA, which is the light blue squiggly line on this chart. You can see it seems to have settled down at that 10% premium to NTA. I think it's an indication of the fact that PL8 now has a very strong track record of delivering on what it has set out to do. So more buyers, I guess, than sellers means the stock is trading at a slight premium to its NTA. I think that's, frankly, a better outcome for shareholders who want to buy additional shares to pay a 10% premium is better than paying a 20% premium. So the Board, I think, are very happy that we're still trading at a premium and probably, frankly, a more realistic premium than those 20% plus premiums that we were trading at 2 or 3 years ago. So I think that's it from me. We thank you for your shareholding. Obviously, the fact that you have enjoyed your experience in PL8 as represented on this chart, where we're trading at a premium to NTA. It's one of the few LICs in the market still trading at a premium to NTA. And I think that's credit to particularly to Don and his team for the management of the portfolio. So Don, with that segue, let me hand over to you to give us a bit of a market update Thanks.

Thanks, Chris, and good morning, fellow shareholders. Before I go into the market update, I thought I'd just do a little segue and talk about one of the reasons for being of PL8 and primarily the target, I suppose, audience is retirees or self-funded retirees, who are looking to live off the income from their investments. They no longer have a monthly salary or a weekly salary that PL8 pays a monthly dividend. In fact, you probably should have got an e-mail in your inbox this morning with the details of the August dividend that should hit your bank account today. And the good thing about if you retire and you have a superannuation, then investments of at least the first $1.9 million of investments are tax-free in super and you get a full refund of franking credits. And I suppose our philosophy is because the one problem you do have with being retired is you have longevity risk, but if you can generate enough income from your investments to fund your retirement, and you don't have to sell anything down, then that's a good place to be, and that reduces your longevity risk. Just to highlight the tax differences on the next slide. We primarily focus on self-funded retirees who are tax-free. And you can see the value of fully franked dividend is actually worth -- excuse me, I'll just have a drink -- sorry I have bit of a frog in my throat. The value of a fully franked dividend, you get a full refund of the franking credit, so $1 cash dividend is actually worth about $1.42. That's why we generally talk about the gross dividends of Plato and the gross yield because you do get those franking credits back. And franking credits are worth more than any other form of income. So it's great to have that. But if you look at the value of that income, it's very important. The next slide, I think, highlights the value of those franking credits. And in fact, the value of income from Australian shares. I've taken 19 years of data, not because it's a round number, but because the index I am using here, that's an S&P index, which includes franking credits, and it started 19 years ago in the start of July, basically in 2005. So we got 19 years of history to the end of June this year. And interestingly, if you just look at the price index of the ASX, I've used the 300, but the 200 is virtually the same. Australian share price have only grown about 3.2% per annum for the last 19 years. That's not actually all that exciting. And in fact, if you just look at the capital growth of like a unit price or what have you of an investment that would have been an index fund, these are using index returns. $1 unit price would have actually grown to not even $2 over the 19 years. So you haven't even doubled your money on the price terms. But that does not count -- share prices don't count the income that you received. When you look at the accumulation index, that includes cash dividends, and that's a much healthier number. It's a 7.6% compound return over 19 years. So it's certainly better. But that excludes the franking. And the gray line at the top of this chart here includes the value of franking that sort of reinvested. And that turns to return to 9.1%. And importantly, if you actually sort of look at that chart, $1 is now accumulated, including the franking to about $5. And that looks a lot healthy if you said, you've got $1 and now it's worth $5 over those 19 years. So the income and franking credits are incredibly important for there. Now I'm not sure what happened to our slides, but we'll see if we can get those back. And the slides are --

Give me a sec, I'll try to [indiscernible] you just crack on that?

Yes, yes. The slides are available. They have been sent out and they are available on the ASX website; we released this morning. So you can actually go there and look at them as well. But it's interesting if you look at the returns on Australian shares, our income levels are much higher than global shares. So if I were to do the same charts and I have them there, we'll get them in a minute. But the global shares have a much lower yield, but they have had much stronger capital growth. So yes, we'll go with the same time period. The MSCI World, which is an index of ex-Australian index of global shares, it's actually generated about 6.8% price growth, which is substantially more -- and thanks, Chris. Slight technical error, but we got that. If you look at this chart-- go back to the previous one, please, Chris. And this is just the price -- comparing price growth of the Australian market, which is in black at the bottom there, that 3.1%, 3.2%. The MSCI World, which is up 6.8% compound and that's just as price terms. And I've also thrown in U.S. shares, which obviously recently the Magnificent 7 and before that, the FAANGs, et cetera, has had fantastic growth. Is up in price terms, 9%. So Australia looks pretty pathetic, really when you compare that. But if we go to the next chart and we start adding in income, this is where the Australian market starts to stand out. Australian equities have a very high yield, partly because of our franking system, it encourages companies to pay dividends, whereas in the U.S., for example, their tax system discourages companies from paying dividends because they have double taxation. So the yield on U.S. share is less than 2%. The yield on global share is only around 2%. So you can see when we add cash dividends in Australia and the black line has not quite but almost caught up with global shares, although it's still a fairway behind U.S. shares. But you only get franking credits in Australia. So when we put through the next chart here, what we find is that once you allow for franking, over the last 19 years, Australian shares have actually outperformed global shares. So the income that's generated from Australian shares, and I think you'll probably you're in PL8 because you know that is very, very strong. And that income and particularly that icing on the cake are called franking credits, has actually made the total returns of Australian shares higher than global shares over the last, well let's call it, 20 years, but it's actually 19 years on the chart. So I think it's just reinforcing probably the reason nature of PL8 is income is very important. It's extremely important in Australia and so does franking credits, and we've been able to generate much higher income and franking them in the market. So I'm probably preaching to the converted, but I think it's an interesting challenge because I have had some people say, the share price hasn't gone very far. Well, that's because the share price doesn't include all that income that you've -- great income that you'd be able to fund your retirement with. So moving on to the market update itself. These are preliminary numbers. They're up to yesterday, so they're very much hot off the press. They are our estimates of the current reporting season, which is the August reporting season. And by and large, I've got dividends up but dollar value down, it doesn't make sense, maybe, but if you actually look at the average company did increase dividends and -- both at the average and median levels at the dark blue and the light blue columns suggests that the average dividend increase was reasonably healthy as was the median. But the very last column and the total dollar value of dividends actually fell by about 1%, went from $35 billion last year to $34 billion this year. This is up to yesterday. And the main culprit for that fall at the dollar value level has been the fact that companies like BHP going to talk about them a little while later, and Woodside some of the bigger companies in the resources area have actually trimmed their dividends because iron ore prices have been down and energy prices have been down a bit as well. So it's been a very mixed result. A lot of the companies that we've been talking about for a while, the insurers have done very well and Insurance Australia Group, a pure-play insurance company increased dividend by 89%, increased its profits by 100%. QBE, a strong dividend increase as well and Suncorp. So the electricity generators, AGL and Origin Energy have bounced back, and that's because the electricity prices are higher. So you're feeling it in the pocket. But if you're an investor in those companies, you're making good profits, and you also had substantial increases in dividend. And the one, I suppose, bright spot in the resources sector this year has been gold stocks, where we've seen in the likes of Evolution, or Ramelius 150% increases in dividends because [ gold ] prices have continued to go up, whereas most commodities, iron ore, lithium, nickel have gone down. And indeed, that's one reason why some of the bad news in the resource sector yes, some are Pilbara Minerals, a lithium miner didn't pay a dividend, didn't pay in February, didn't pay in August. So it's 100% reduction. Mineral Resources also has some lithium and [indiscernible] and Whitehaven in coal dropped its dividends by 69%. There were some ordinary results in some of the other sectors, Tabcorp, down 70%; Magellan Financial down 49%. They continue to have fund outflow. Orora has made a pretty shocking takeover and cut its dividend by 44% and Seek is finding it tougher in the job market, down 30%. But overall, 58% of companies actually increased dividends. So it's not too bad. 9% were flat and 33% reduced, which is a bit above average. But it's sort of a mixed bag there. If I move on to some of the individual results, I'm going to start with what is now the biggest stock in Australia. It overtook BHP. CommBank reported a slightly lower but almost flat result, generated about $10 billion in cash profits, which is not bad and by any stretch of the imagination. And whilst net profits were actually slightly down, management was confident enough to actually increase the dividends from $2.40 last year to $2.50 their final dividend, which is a 4% increase. Basically, I think the reason they've increased their dividend payout ratio to around 80% is because -- that is -- flushes out all the franking credits. And historically, [ CBA ] has been able to actually do buybacks to return excess franking. That's no longer allowed. So I think they're trying to pay out all the franking that they have and hence, they increased their payout ratio. The other thing is all the banks have excess capital. It's only CommBank and Westpac that have excess franking so they're able to sort of increase dividends. Westpac did it especially in May, whereas ANZ and NAB are actually returning capital via buybacks because they don't have excess franking. I think the one most important thing to note about the CommBank results, the very last line there, their bad debts were only 9 basis points. That's actually less than last year. And that is -- there were a lot of doomsayers around talking about mortgage cliffs and people were not being to fund their mortgages. There will be all sorts of problems, there would be huge bad debts, there would be foreclosures, et cetera. That has not eventuated. Bad debt across the main big 4 banks are actually very, very low. And I think it's one reason why the bank stocks have rallied very strongly because those bad debts have not eventuated. But the problem with the share prices have gone up means the yields on these stocks have actually fallen. So CommBank is now looking pretty expensive, but it still pays a good chunky dividend. Another thing I think to note, and this is a slide straight out of the CommBank result. I think it helps explain why there's a lot of negativity in the Australian marketplace, but also why things aren't as bad as -- I went -- I lived through the recession we had to have, and it doesn't feel like a recession in Australia at the moment. But it is a tale of 2 halves. And or in the way CommBank calls it, cost of living impacts are unevenly felt. If you look at a couple of the slides there, in the middle or some spending numbers from CommBank, they split it up into essentials and everybody is spending about 3% or 4% more on essentials because that's what the inflation rate is, and you have to pay your electricity bill, you have to buy your food, pay your electricity bill. So people are spending around 3% to 4% more this year than last year on essentials. But it's the discretionary items that have told the tale. And there is a case of younger people who are probably feeling the brunt of mortgage increases and -- or rental increases if they're renting homes because we've seen big increases in rentals across Australia. They're cutting back on discretionary items. They're not going out as much or they're trading down. They're actually going backwards probably about 5% in real terms. So these numbers in nominal terms are down 1% or a bit over 1%. But if you add inflation, and that means people are probably spending 5% less in consumer discretionary items. On the other hand, older people, probably a lot of shareholders in PL8 are actually spending more and indeed, their savings are still looking very strong. So all the people who have paid off their mortgage, have money in the bank, have share portfolios, which have generally gone up. It's been a pretty good year and [indiscernible] which has gone up, are feeling pretty good, and they're still spending. So half the economy is still spending well and the other half are battening down the hatches a bit. Interestingly, though, if you look at some of the results of the retailers, they haven't been as bad as people thought. And one of the headline ones there is JB Hi-Fi which we've been over with, for some time, actually, they seem to have done very well over the last 3 or 4 years. They -- whilst their earnings were down a little bit, they are actually about 4%, 5% above what the market expected. And well, if you look at the total dividend that they paid, they actually increased -- they've had a final dividend of $1.15 last year, they paid a total dividend this year, final dividend plus a special of $1.83. Now, $0.80 of that was a special. Their ordinary was actually a little bit lower than last year, but they're, again, flushing out franking by paying that special dividend. And interestingly, they noted that the outlook or at least the early results of the July sales, I reported them for the first 3 or 4 weeks of July, were up about 5.6% here in Australia and up a very healthy 12% in New Zealand. So the outlook is looking a bit better. We've got obviously tax cuts coming through, which might have been one of the reasons why the Australian sales are a bit stronger than they were last year. Moving on to the insurers. I've already talked about them, but some pretty good results there, particularly the pure-play IAG, as I mentioned, 100% increase in earnings, 89% increase in dividends. It's only 50% franked, but still a pretty healthy dividend. We've been backing the insurers. I know it's a bit of pain when you open up your insurance policy and you're paying a higher premium. But if you're a PL8 investor, you can at least say, well, at least I own some of those insurers and actually their profits and their dividends are growing, and that's helping pay the PL8 dividend. And so the PL8 dividend is going to be where it is because you're getting some good dividends out of the insurers. And next slide is BHP. Now BHP is probably -- it wasn't the greatest result, but -- how can you say -- I mean it's NPAT are reported in U.S. dollars, it made $13 billion or nearly USD 14 billion, that's AUD 20 billion, and that's actually double what CommBank made, but CommBank's actually capitalized higher than BHP. That's a pretty good result. I think it's trading on a yield close to 8% when you include franking, and it's got some growth options coming there. It's been investing heavily into potash, which is one reason why its payout ratio is not as high as it maybe it could be because it's investing in the Jansen potash program. That's 52% complete. So in a couple of years' time, we'll start to see some contributions hopefully from that. And it's also looking to significantly increase its copper output; going forward. And copper is actually probably one of the stronger commodities at the moment. We need copper for everything, not just EVs, but everything and copper prices have held up pretty well because there isn't a lot of new supply coming on and BHP hopefully, will bring some on. There's always a few laggards though, and a couple of fund managers, our fellow fund managers have struggled, Perpetual and Magellan are seeing fund outflows. They've cut their dividends. There were stocks that were -- we had predicted would cut their dividend. And Pilbara Minerals have obviously [indiscernible] lithium prices have fallen dramatically. So we knew they weren't going to pay a dividend. And these are some of the stocks that we have avoided because. It's not all about getting -- buying the stocks that are good, it is also avoiding the stocks that are bad. And finally, as an outlook slide, I think this is quite good because -- and I've shown this slide for a little while. Part of our process is we -- obviously, we buy stocks and trade stocks for dividends. We buy stocks usually a couple of months before they report it. So we're taking -- when we buy stock, we are actually taking on the risk of owning that stock that it might have a poor result. So it's very important for us to try and sort the wheat from the chaff. And one of the ways that we do that to avoid what I call dividend traps like the Magellans and Perpetuals and Pilbaras is we actually have a model which forecasts the likelihood a company will cut its dividend. And this comes out with a probability, the probability varies between 0% and 100%. Now on this slide, I think of the probability of cutting your next dividend, that's what we're forecasting. A high probability is bad. So in this chart, high is bad, low is good. You can see that the pandemic year it just was 4.5 years ago, believe it or not, when the pandemic hit. This thing went ballistic, it went to the highest level, with over 45%. But remember, 4.5 years ago, APRA told the banks not to pay dividend, told the insurers not to pay dividends. The likes of Harvey Norman and Qantas cut their dividends completely. We think Qantas will be in a position to pay fully franked dividends next year. So it's taken about 5 years for them to come around. But things were really bad 5 years ago, they've improved a huge amount. It didn't take long, though, whether that model peaked out or that probability peaked in about March, April of 2020. By 2021, that line -- the black line dropped below the long-term average, to flat line there, which is good. A low number is very good, which means dividend increase, and we saw a big bounce backs in dividends in '21 and '22. What we have seen in the last couple of years is this little line, the black line has snuck up and actually been a little bit above average, but only ever a little bit above average, nothing like the pandemic, nothing like the GFC back in 2008. And interestingly, as the numbers came out in August, the latest reading on this, which is pretty much the current reading on this probability of cutting dividends, it's -- that line is now back. The worm, if you want to call it that way, is back to the long-term average. So we think the outlook for dividends is okay. I know the last 2 years, dividends are basically flatlined in dollar terms in the Australian market, mainly because BHP has cut its dividend. So we've actually seen a plateau in dividends. But hopefully, if we see interest rate cuts late this year or probably more likely early next year, we might see things improving in '25. So that's sort of where I want to leave it. We'll take some questions if there are any. I think there are a few.

Yes. Great, Don. Thanks for that. Just because it's a Friday, I'm going to first just one of our shareholders' anchor says, that's just a magnificent Ficus plant behind Don. Hopefully, it's a decent -- so to break the ice -- but Don, maybe the first question, and it's actually not the first question, but it's relevant because you've got the slide up here is, obviously, you're commenting using the slide that the probability of a dividend cut has gone down a touch. But what's the probability, if you like, of dividends going up and therefore -- and also, I guess, what are the conditions; he asks, Paul asks; where we might see an increase in the dividends paid out of PL8. He is not -- he is saying he doesn't -- he likes stable dividends. But he is sort of asking, what are the conditions that are required in order for us to pay a higher dividend out of PL8.

Yes. Well, PL8, gets its dividends by investing in Australian stock. So what we need really is dividends at the market level to start increasing. And as I sort of mentioned, if you actually go back over the last 2 years, dividends have plateaued, they fell heavily in 2020. They actually rose very strongly in '21 and '22 and basically set a new high in terms of dividends at the market level and went to basically above trend. In the last 2 years, we've basically seen dividends -- total dollar dividends in the Australian market plateau. In fact, if anything, they've actually fallen about $1 billion a year in the last couple of years, mainly because you've seen BHP, which made a massive dividend a couple of years ago has cut back, and that's because iron ore prices have come back to around $100. They were around $130 and have been higher a few years ago. So what we really need is for Australian companies as a total to pay bigger dividends, and part of that, I think, will be the economy is starting to rebound because the economy -- we're not in recession, but the economy is sort of very flat. The latest GDP numbers were only very slightly positive. So we do need the Australian economy to start growing again and companies that are as a whole, paying more dividends before I think we could see an increase in the PL8's dividend because we're only able to pay what we can do. We will be trying to rotate and aggressively move between stocks to get as much dividends as we can. But if the pie isn't growing, it makes it hard for us to grow that dividend. And now hopefully, we'll see some interest rate cuts next year I don't know, Mr. King at Westpac thinks there will be cuts, 2 or 3 cuts, next year, and hopefully, that will start to see the economy growing again. Hopefully, we'll -- we're at the bottom of the sort of price cycle for some of those minerals, we'll see those coming back as well. And the outlook for gold and copper still looks pretty good. But you really need iron ore, I think, to start to kick up as well because that's a big dividend drive for BHP Rio and Fortescue.

Don, just talking about minerals. There's a question you have about [indiscernible] Mineral Resources. And I think you touched on it in your comments, cut its dividend to 0, share price fell nearly 50%. Was that one you own, didn't own? Did you pick it up as a dividend trap? Maybe just if you could comment on that? Don is frozen. Maybe while we get Don back, there's a couple of questions here. I'll answer for shareholders. One is PL8 trades substantially above its NTA. Other listed funds struggle to maintain a price close to their NTA. Why is that? I think [ Rod ] asks that question. It's not -- it's a little bit more art than science. But I would say a couple of things. One is, generally, in my experience, listed investment companies that have strong investment performance. Don's arrived in the room, yes. So we're going to do this together, and it's great. We'll improvise. Don, I'm just answering the question here from Rod about PL8 trading at a premium to its NTA and why that might be the case while others struggle.

Yes. Sorry, apologies, my internet connection, my technology went down. I don't know why and it --

It's okay.

But we can do the Chris and Don show.

Back on track.

Well, why is it trading at a --

I was about to answer it, but you go ahead. Don you answer.

Well, I mean, clearly, it's an LIC that's at any point in time, there is a limited supply of stock unless the company issues new shares. And I -- it's very simple, it's I think there are more buyers than sellers. And I think one of the reasons is it's an income play. It gives that regular monthly dividend. If you're an investor and you're happy with it, you put it in your back profit and get that income every month and you're probably not looking to sell it. Yet there are other people who haven't -- don't own it, who are looking like they want that regular income. So I think the reality is that it's quite popular. And yes, it's a limited supply because people probably don't trade at as much as maybe other stocks. Like you think about it and sort of what we do but like, if you're in an LIC that only pays dividends every 6 months, and you're looking for more income, you might say, "Well, I've got the dividend here, maybe I'll move on something that's going to pay dividend shortly." While we get a dividend every month for PL8. So there's no incentive to sell after you get a dividend because you're always going to get the next one. Whereas in other stocks often people will say, "Well, I've got my dividend here, I should move on."

Yes. I would -- thanks, Don. I would maybe make a couple of extra comments there, Rod. One is -- this feels like there's been a bit of a flight to quality in the market overall, not just in listed investment companies, but Don was even talking about that just with regards to stocks in general. And if you think about PL8, because it's large, at sort of $800 million market cap and therefore quite liquid, and it's been around for a long time and doing what it says it should do for a very long time. That tends to put it in the sort of higher quality bucket in people's minds and perceptions. And so whenever there's uncertainty, whether that's uncertainty about stock markets, uncertainty about the economy, often you get this flight to quality. And we've seen that in the bond market, the stock market, and I guess, to some extent, PL8 is benefiting from that with its premium to NTA, while other LICs that maybe haven't been around for as long or maybe are a little bit smaller, a little less proven aren't attracting the same level of interest. And then the second thing I would say is if you think about the benefit of a listed investment company and its ability to pay fully franked dividends on a steady basis, that's just not true for listed investment companies that have global equities in their portfolio because they don't earn the same level of franking credits from their portfolio. And so some of the discounts to NTA that are prevalent in the market are global equity portfolios that just can't use the listed investment company structure in the same way to benefit shareholders as an Australian equity portfolio like PL8 can. So thank you for that question. There's a question. There's a lot of questions here, Don, about are we going to have another SPP this year. Do you want to comment on that?

Well, one of the things that we have is that we don't have limited capacity in this strategy. We are very actively trading it. So remember, we have an unlisted fund as well. And in fact, the history that Chris showed of the unlisted fund has now been around for coming to 13 years next month. PL8 has been listed for 7.5. So what we don't want to do is be too greedy and run too much money and not be able to deliver on the income and total return objectives. So we think there's final capacity, and we're pretty close to that capacity. But we don't want to exceed it. So that probably reduces our ability to do an SPP. And I think the other thing is when the share price is at 20% that was almost a ridiculous premium. And clearly, that meant there was a lot more bias itself. So I think the SPPs we've done have helped reduce that back to that 10% mark. But I think we'd rather -- Directors would rather have at a small premium than at a discount, but you can cause problems for companies.

I think -- just to answer some of the specific questions about will there be one? Obviously, we can't say for sure. But I think shareholders should assume that it's unlikely that we have an SPP this year unless something significant changes in either the capacity of the manager or, frankly, the income levels between now and when we anniversary the authority to do a share purchase plan.

Yes. I mean we do have a couple of institutional clients in our income strategies that they may not be there that might release some capacity, et cetera. But at the moment, we don't have a lot. So -- but Directors ask this every meeting. We have robust debates that--

Don, he has one on just how often you rotate. Do you want to give us a feel for the turnover of the portfolio?

Well, as a percentage turnover is between 150% and 200%. But if you actually look at it, when we go through the dividend season, which we are now, we basically [indiscernible] every day. And we -- because as soon as the stock goes ex dividend and we're there just for the dividend, we'll look to buy another stock that's coming up to its dividend period. So our trading is very extreme, and quite extensive. But I'd say that roughly about 50% of the portfolio has turned over about between 3 and 4x a year.

Right. Okay. So it's a very actively managed portfolio for that reason you --

Yes. I mean I think that compared to a lot of other LICs, a lot of other active managers, we are actually more active than most keeping that turnover. And that's how we can generate much higher income than the market, but not take aggressive bets because the [indiscernible]. Because the only other way that you can do that would be if you're just trading in -- or owning shares would be a very, very high overweight to banks and other high-yielding stocks. And whilst banks have done well in the last 12 months, the previous 4 or 5 years though were pretty tough years. And if you go back right to the start of PL8, when we were rising, the great income stock at the time, Telstra was cutting its dividend. And while its slightly increasing at the moment, it's still substantially lower than it was 7 years ago. So -- and I suppose there's a reason but to me, benefit of PL8 is it's a diversified portfolio of income stock, not just 1 or 2. So you are not relying on just Telstra or just BHP for your dividends, we do trade around. We add stocks in all sectors. So it gives you a much smoother ride, and hence, we can face both dividends.

Maybe that's a good segue to [ Peter's ] question, yes, Don, what you can see is just around resources stocks. If they do continue to have a tough time. I mean, you showed us gold looks pretty good and the BHP wasn't so bad. But if resources have a tough time, can we still maintain our distributions.

Well, if you -- this is before the PL8, but if you actually went back to 2016, we were running the fund, the underlying fund there, which is -- when PL8 actually invested to that fund. We were able to maintain the yields and distributions out of the underlying fund in 2016 even though you saw, yes, a disaster, I suppose, in the resources sector. So the beauty of our approach that we're very active is we will move to where the dividends are. And so -- and also, do you think about it -- the market is sort of self-correcting. If BHP and Rio and other stocks, their profits decline, the market cap goes down and the market cap of other things goes up. So we'll be buying more of the other things more and less of those. But I would say at the moment, the yields on stocks like Woodside and BHP are still pretty healthy. Like BHP is almost an 8% gross yield. So yes, its dividends have come down about 19%, I think. It's always a bit interesting because BHP reports in U.S. dollars, but I think we all think about the A dollar and I convert the dividends to A dollar equivalents in the slides there when we looked at it. But it's still a pretty good yield and same on Woodside.

Many of lithium, which is a small...

Yes. I mean lithium is tiny part of the market, it doesn't really count. I mean we had small volumes in Pilbara last year, none this year.

Okay. Don, maybe this is the last question is -- let me just see if it is the last question is -- maybe there's 2 more. One is level of profit and franking reserves. I'll take that. And profit reserves really aren't a major constraint. The company is in very good shape, having had increasing markets over the last while. We've been able to bank some profits. In terms of franking reserves, I think we've quoted the number in the annual report of about 9 months worth of dividend cover. So it's certainly adequate -- sorry, franking reserves to cover the current rate of dividends.

Yes. And that's a reserve that like at a point in time, remember, we're always getting new franking credits as we get new dividends. So that is a profit reserve. I think it's a little bit less than 1 now, but it's still reasonably healthy.

Don and this final one is, will there be any further PL8 share acquisition off market? I presume that's off-market buybacks, what the question is?

Yes. I mean, yes, I would interpret that and the answer will probably is no because the government has sort of outlawed them. Interestingly, though, that legislation hasn't been passed. I mean none of their tax is the legislation on superannuation funds over $3 billion. None of those have been actually passed by parliament at the moment. But because they announced that they were going to crack down on them [indiscernible] companies started off market buyback. They wouldn't get the approval. I've got to get ATI approval anyway and the ATI wouldn't approve it, given the government said it's not going to happen. So at the moment, they're off. And that's why I think we're seeing some special dividends from the likes of JB Hi-Fi et cetera, that all the increased payout ratio from CommBank because they realize they have to distribute shareholders by the franking credits to shareholders, they just have to pay more dividends. So they can't do that buyback.

So we might -- I guess there might be a situation where even if the economy doesn't really come roaring back, we still have more income or more dividends because of these specials or higher payout ratios.

Yes, there's still a few companies that have got excess franking. So although a classic one, there's Harvey Norman that's got a big franking account balance, but they probably really need to -- they need the cash to pay it out. So they probably need to sell a few of their properties before they could afford to do that. But there are certain listed companies with -- from franking credit calls that can still be paid out and there's still a lot of companies that are -- like CommBank to the -- making great profits and paying a lot of tax so they can pay fully franked.

Okay. I think let's leave it at that. We are at 11:45 East Coast time. So we thank you all for your time and participation. It's always super interesting to see the questions that come through from shareholders, and you're very active participants. So we love these webinars with you. And Don, thanks for joining me for the Q&A. Maybe it was a good thing...

I think it might work better.

Maybe we will try one the next time. But again, thanks for your time and attention. Don, thanks for the market update. And we'll, as I said, get this replay off to you sometime today and together with the slides. Thanks for your shareholding and for your participation this morning. Have a good day.

Bye.