Hans Lee
5 minutes reading time
Most Australian investors earn income predominantly from local sources: term deposits, distributions from hybrids and dividends from Australia’s largest companies.
While these have served investors well historically, this geographic concentration presents a challenge: when local assets face headwinds, income can be significantly impacted.
The reality is that a core income strategy focused solely on Australian assets may no longer be enough. This is where satellite income ETFs can help by offering exposure to global income sources that complement an investor’s existing core strategy and reduce reliance on domestic market conditions.
When income is concentrated, so is risk
Australians have traditionally relied heavily on the same tried-and-true income sources.
In the sharemarket, this has historically been dividend-paying companies, namely the Big Four banks, miners and industrial companies. But these companies also make up a significant portion of the S&P/ASX 200 index. As at 31 October 2025, financial and materials companies make up more than 55% of the ASX 200. Further, in the 10 years to 31 December 2024, between 64% and 78% of all the dividend income paid out in the sharemarket was delivered by just two sectors: materials and financials (including real estate).
This concentration presents unique challenges. Superannuation funds and self-managed super funds (SMSFs) that rely heavily on ASX dividend income may find their retirement planning disrupted if these sectors were to face simultaneous shocks. These shocks could include (but are not limited to) regulatory changes, commodity price slumps or a credit event.
More broadly, economic cycles are often not evenly felt. Banks may thrive during periods of rising credit demand, while resource companies can struggle if commodity prices fall.
This is why many investors seek multiple levers for generating steady income. A diversified income portfolio consisting of exposures to broad market investments, dividend-focused local or global equity strategies, fixed income, real estate and other income-generating assets has greater potential to deliver through all seasons than a portfolio that is concentrated in a single asset.
How income can be both a core and satellite focus
The challenge of income concentration has led many investors toward international satellite strategies that can provide access to alternative income sources that operate independently of traditional Australian dividend payers.
It is important to emphasise that income can be a focus across an investor’s core and satellite exposures. An investor also doesn’t have to limit themselves to just one satellite exposure.
Two satellite ideas
Two distinct approaches illustrate how satellite income strategies can complement each other. While an investor may only invest in one of the following two ideas, the two funds together may add even greater diversification of income sources.
The first approach targets royalty income. Royalty companies operate differently from traditional businesses. Rather than producing goods or services themselves, they earn income by owning rights to future revenue streams – such as royalties from resource extraction, drug sales, or intellectual property licensing.
This model allows royalty companies to benefit from the growth of underlying industries without bearing the operational risks or capital costs typically associated with them.
At their core, royalty companies are:
- Capital-light: They often avoid the need to build, mine, manufacture or distribute.
- Scalable: Income can grow without proportional increases in cost or complexity.
- Diversified: Many royalty companies hold rights across multiple assets, sectors or geographies.
- Resilient: Their revenues are often linked to final sale prices, offering better insulation from input cost inflation.
ROYL Global Royalties ETF provides exposure to royalty companies. As at 1 October 2025, it has a 12-month distribution yield (the annual income paid to investors as a percentage of the fund’s price) of 4.4%1 and pays distributions monthly. In addition, ROYL has delivered a 21.19% p.a. return since its inception on 9 September 20222.
Another strategy provides exposure to global companies that have either maintained or increased their dividends every year for at least 10 consecutive years. Companies that consistently grow dividends are often signalling confidence in their future cash flows and operational strength.
A long track record of uninterrupted dividends, particularly through times of earnings stress or economic downturns, reflects management’s commitment to shareholders and the underlying financial quality of the business. These companies are known as Dividend Aristocrats.
But instead of having to find and invest in all of them individually, Betashares has its own INCM S&P Global High Dividend Aristocrats ETF that focuses squarely on this strategy.
INCM pays distributions quarterly and its index has delivered a 5-year return of 14.77% p.a.3 (as at 30 September 2025).
Two strategies, one goal
While one satellite has the potential to add value to your portfolio, a combination of satellites may help it reach its full potential.
ROYL’s royalty-based income operates independently of traditional dividend cycles and may benefit when commodity prices rise, or asset values appreciate. INCM is designed to provide investors with both income and growth potential through companies that have maintained dividend growth even during economic downturns.
Together, they can create income streams that respond to different market conditions: one tied to asset performance, the other to operational consistency across various economic cycles.
Investors don’t have to choose just one path
Building resilient income requires moving beyond traditional assets and the concentration risks they may carry. Satellite ETFs enable investors to maintain their core Australian holdings and access additional income sources by investing in assets that operate on different cycles and market drivers. By diversifying beyond traditional sources, investors can generate yield that may perform across different market conditions.
Footnotes:
1. Yield is calculated by summing the prior 12-month per unit distributions divided by the closing NAV per unit at the end of the relevant period. Yield will vary and may be lower at time of investment. Past performance is not indicative of future performance. ↑
2. Past performance is not an indicator of future performance. ↑
3. Past Performance is not a reliable indicative of future performance. You cannot invest directly in an index. ↑
