Is it better to invest in ETF’s or LIC’s for dividends?

Hi Chantal. Well, depending on which funds you choose, both can pay dividends. So it depends on what you had in mind. Do you mean a stable income stream? Or do you mean the highest yield right now? Both are different.

In general, LICs have a greater ability to pay a smoother income stream, given they operate as a ‘company’ and are able to decide their own level of dividends to pay out based on their profit, whereas ETFs are forced to pay out all income and have no control over their payouts. In Australia, you’ll find that there are some old LICs which have produced similar dividends from year to year (historical, so not guaranteed going forward). Some LICs that have been around for decades include AFI, ARG, AUI and there others (just examples not recommendations).

If your goal was to target a high yield, but don’t care about the stability of that income, then there are a handful of ETFs which have are managed with that specific goal. A simple google search of ‘high yield ETFs’ and you’ll find a few options.

To be clear, both approaches (and both vehicles) have their pros and cons, but I hope this helps begin to answer your question :)