Where Australia's high yields come from, and who pays for them
The ASX's high yields mostly come from a handful of structures, each built to pass nearly everything out, which leaves them borrowing or raising to grow. What each one leans on, the trust that couldn't refinance in 2007, and the income product the regulator is retiring.
Ask where the high yields are and you get handed a list of structures rather than companies. That's the most useful thing on the list. Each of those structures yields more by design: it passes nearly everything it earns out the door, keeps almost nothing, and so has to borrow or sell new units whenever it wants to grow. The yield is the part you see. The funding is the part that decides whether it lasts.
The American version of this list runs through REITs, MLPs, BDCs and something called YieldCos. The ASX has its own cast, and a couple of stories about what happens when the funding stops.
Where the yield lives on the ASX
Six places, and what each one is quietly leaning on.
| Where it lives | Why it yields more | What it quietly depends on | Franking, usually |
|---|---|---|---|
| Property trusts | Rent passes straight through as distributions | Occupancy, rents, and refinancing on time | Largely unfranked |
| Stapled infrastructure | Long contracts, often linked to inflation | Borrowing, at rates that move | Often a mix |
| The big banks | High payouts, plus franking | Housing credit and APRA's capital rules | Fully franked |
| Miners and energy | A share of profits at the top of the cycle | The commodity price | Franked while profits last |
| Listed investment companies | Smoothed out of a profit reserve | The reserve, and the price against NTA | Franked |
| Listed credit and hybrids | Interest from lending | Borrowers repaying, and the regulator | Varies |
Two of these have their own pieces already: the three kinds of promise inside a high yield and what a fund distribution really is. The rest of this is about the third column, the one people skip.
Paying out everything means buying your growth
A structure that hands over almost all of its cash keeps almost nothing to grow with. So when it wants another shopping centre or a longer toll road, it borrows, or it sells new units. That works well most of the time, when money is cheap and investors are in a buying mood.
It also means the trust can grow without you growing with it. Here's one that issues 6% more units every year and uses the money to keep its payout per unit exactly where it was.
Show the numbers
| Your distribution per unit | The trust's total distributions | |
|---|---|---|
| Now | 100 | 100 |
| Year 1 | 100 | 106 |
| Year 2 | 100 | 112 |
| Year 3 | 100 | 119 |
| Year 4 | 100 | 126 |
| Year 5 | 100 | 134 |
| Year 6 | 100 | 142 |
| Year 7 | 100 | 150 |
| Year 8 | 100 | 159 |
| Year 9 | 100 | 169 |
| Year 10 | 100 | 179 |
Some raisings do better than that, when the new assets earn more than the new units cost, and they lift the payout per unit. Some do worse, when units are sold cheaply into a market that doesn't want them. Either way, the trust's total is its number. Per unit is yours.
That's why Dividend Guardian records every payment per share, with the date it recorded it. It's the one figure that describes what you're actually being paid.
When the lenders stop lending: Centro, 2007
In December 2007 Centro Properties, one of Australia's largest shopping centre owners, told the market it couldn't refinance billions of dollars of short-term debt it had taken on to fund acquisitions. Its securities fell about 76% in a day, and it withheld its distribution for the second half of the year.
The shopping centres were fine that week. People still shopped in them. What had changed was whether anybody would lend, and the yield had never said a word about that.
The rest of the sector learned the same lesson more slowly. A study of Australian listed property rights issues found that during the GFC they sought about two and a half times as much equity as before, at discounts about two and a half times as deep. Anyone who couldn't or didn't take up their entitlement ended up owning a smaller share, and every future distribution was spread across more units.
When the rules change: bank hybrids
The American version of this warning is about the tax treatment of pipeline partnerships. Australia has a bigger and more recent one. On 9 December 2024 APRA decided to remove Additional Tier 1 capital, the instruments most investors know as bank hybrids, from the bank capital framework.
| When | What happens |
|---|---|
| 9 December 2024 | APRA announces it will remove AT1 capital from the prudential framework |
| 1 January 2027 | The new rules take effect |
| 2032 | APRA expects existing AT1 to be phased out, with no call dates beyond it |
APRA's reason, in its own words: AT1 “doesn't operate as intended during a crisis due to the complexity of using it, the potential for legal challenges and the risk of causing contagion.”
Nothing went wrong at any particular bank. For a generation of retirees who treated hybrids as a dependable franked income, the product itself is being retired, and whatever takes its place in their portfolios will have to be chosen rather than inherited.
What to check before the yield
Whether you can explain the structure in two sentences. If you can't, the yield is paying you for a risk you haven't priced.
How much it owes, and when. The debt maturity profile sits in the annual report, and a trust with a large slice of its debt falling due in one year is making a bet on that year.
Whether the unit count is rising faster than the payout per unit. If it is, the trust is growing and you aren't.
Who writes the rules. Tax treatment, prudential standards and long contracts can all change underneath you, and one of them just has.
And how much of your income comes from any one of these structures. Two property trusts and a bank hybrid can quietly add up to half of what you're paid.
Guardian shows that last one directly: your income by company and by sector, as a share of what you're paid set against a share of what you own. It watches the dividends of everything you hold and tells you when a company confirms a change. Instead of a safety score, it shows what has actually been paid, per share, and what has changed.
See which structures your income comes from
Start free, with no account and no broker login. Paste your holdings and see what they pay over a year, which months it lands in, and which of your bills it already covers.
For A$6 a month or A$60 a year, Guardian keeps watching: every payment recorded per share, your income by company and by sector, and a note when a company confirms a change to what it pays. There's a 30 day money-back guarantee.
Build my Dividend PaycheckDividend Guardian provides information and estimates from public data, not personal financial advice, and nothing here is a recommendation to buy, hold or sell anything, including any structure or security mentioned. The map above is a general description rather than a rating, and the trust example is arithmetic. Hybrid dates are from APRA's announcement. Tax treatment varies by structure and by holder, so check it with the ATO or a registered tax agent. Guardian reports confirmed changes; it does not predict them.