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Dividend investing – a key source of income in a new world

Announcement posted by FCR (Financial & Corporate Relations Pty Limited) 15 Mar 2012

Sydney, March 15, 2012 – Dividend stocks can be a means to an end in a new world of longer
lifespans according to BlackRock Investment Management (Australia) Limited (BIMAL).
James Holt, Investment Strategist at BlackRock Australia said, “An Australian male currently
aged 60 has a one in two chance of living to the age of 86 and one in four chance of living to the
age of 92. That’s many years of post-career and post-regular income living.

“Many approaching retirement seem unprepared for life without a regular pay cheque and we
think investment in high dividend paying stocks should be considered as part of a long term
income generating solution.”

According to BlackRock’s latest white paper, ‘Means, Ends and Dividends’, generating income
in the deleveraging phase is even more important for the aging population when traditional
hunting grounds offer less opportunity or have completely vanished.

The white paper outlines that interest from cash and low-yielding bonds alone is unlikely to pay
for retirement, especially when investors take into account inflation. Dividend yields and dividend
growth are crucial components of total return, offering an appealing investment strategy for
investors who take a long view and are not forced to sell assets prematurely.

“Equity market followers have tended to focus on capital values because they are eye-catching
and immediate. Admittedly, dividends’ contribution to total return will often be swamped by
capital moves over 12-month periods.

“Over time the difference in accumulated wealth due to reinvestment of income is huge thanks
to the power of compounding. In fact, over the 40 years to December 2011, dividend growth
was the single largest contributor to nominal returns across key developed markets, including
the Australian market,” Mr Holt said.

There are four basic strategies for dividend investors to manage their income stream according
to BlackRock:

1) A passive strategy that collects or reinvests the income on an index.
2) An approach based on investing in above-average yielding stocks with the objective
of generating long-term superior returns.
3) Investing in companies that have a better-than-average starting yield and increase
their dividend payments faster than the market over time.
4) Active management of a portfolio with the objective to generate income.

“There is no doubt we are entering a period of prolonged volatility. Global economic growth is
expected to be slow for some time due to the fallout of the European debt crisis, global banks
shedding assets and spending cuts by corporations and governments. The pre-crisis levels of
global growth are unlikely to return any time soon because they were enhanced by enormous
amounts of leverage.

“Companies have plenty of room to increase dividends because they are currently paying out a
low percentage of earnings. Recent trends confirm US companies have been raising dividends
and we believe the best values for capital appreciation are companies with strong cash flows
that have the ability to raise dividends,” Mr Holt said.

Earlier this month, BlackRock launched a global thought leadership campaign, ‘Investing for a
new world’, launching five practical actions to help investors world-wide take advantage of a
broader array of assets, strategies and investment styles. Seeking new sources of income to
build wealth over the long term is one of BlackRock’s focus areas.

About BlackRock

BlackRock is a global leader in investment management, risk management and advisory
services for institutional and retail clients worldwide. At December 31, 2011, BlackRock’s global
AUM was $3.513 trillion. BlackRock offers products that span the risk spectrum to meet clients’
needs, including active, enhanced and index strategies across markets and asset classes.
Products are offered in a variety of structures including separate accounts, mutual funds,
iShares (exchange-traded funds), and other pooled investment vehicles. BlackRock also offers
risk management, advisory and enterprise investment system services to a broad base of
institutional investors through BlackRock Solutions. Headquartered in New York City, as of
December 31, 2011, the firm has approximately 10,100 employees in 27 countries and a major
presence in key global markets, including North and South America, Europe, Asia, Australia and
the Middle East and Africa. For additional information, please visit the Company's website at
www.blackrock.com