Post CGT: These tiny miners offer unexpected yield in a new investing world

• Pro investors say CGT changes make income-yielding stocks more attractive
• While fundies say they aren’t changing their strategies, stocks that pay fully franked dividends can offer advantages for investment portfolios
• While numerous large-cap miners are dividend payers, we seek out smaller players that place yield at the forefront of their investment proposition

The investing landscape has shifted since May, when Federal Treasurer Jim Chalmers issued the most significant change to the Australian tax system since the introduction of the 50% capital gains tax discount by the Howard government in 1999.

Along with sweeping changes to the treatment of trusts and negative gearing on residential properties outside new builds, the key change will be a 30% minimum tax on capital gains, with an inflation indexation system similar to the pre-1999 model replacing the standard discount when calculating the tax rate on the gain.

Property prices have already been falling across capitals on the eastern seaboard, with the logic for the change officially claimed to have been directed at getting more young people into home ownership.

But investment portfolios have proven to be potential collateral damage, with high-profile investment figures campaigning against the change on the grounds that it will capture gains made by founders and early-stage mineral explorers and reduce the ability to offset losses on speculative stocks.

Given income is not subject to the changes and fully franked dividends maintain the benefit of franking credits (taxes paid by a company can be passed on as a tax credit to investors), Perpetual Asset Management’s Nathan Hughes says income-generating stocks could become increasingly attractive.

“They are changing the way income and capital growth are taxed. Capital growth is being taxed more,” said Hughes, the manager of Perpetual’s Income Share Fund in a recent article.

“But income hasn’t changed – and you’ve still got the benefit of the franking credits as well.

“So, income will become a much more important contributor to your return going forward because of these changes.”

Investors will still chase growth

That doesn’t mean professional investors are putting stocks delivering capital growth alone to one side if they can find outsized value in a small-cap name.

“I think there’s a lot of changes investors are trying to get their head around and we’re seeing a few wanting to sell up their residential property investments and move into funds,” Cerutty Macro Fund’s Chris Judd said.

“I think just broadly speaking, just people are going to invest with a much more sensitive lens around taxation and fully franked dividends are potentially going to be a part of that as well.

“I’d be lying if I said we’re changing our investment strategy because of it, and now we’re chasing dividend stocks. It hasn’t changed our perspective. But I agree that it will change how some people are viewing the market.

“Investors will be more focused on total return. But there’ll be perhaps just a little bit more bias towards getting that through franked dividends and the tax benefits of them than they were pre-budget.”

John Forwood, the chief investment officer for the listed Lowell Resources Fund (ASX:LRT) focuses his strategy on speculative resources stocks. While that hasn’t changed, he does believe the discount of its unit price against the fund’s net asset value has reversed since the May budget.

LRT is one of only a handful of trusts listed on the ASX and is not allowed to retain profits, meaning it must distribute them to its 1300 unit holders. It’s paid a distribution in each of the past seven years.

“I think one barometer of that is the discount that we trade to underlying NAV and that has reduced somewhat. More typically it’s, over time, generally traded between a 10% and 15% discount. But at the moment, we’re probably trading at more like a sub-10% discount on average,” Forwood said.

Lowell on Thursday announced it had secured $11.9m in new investments via placement, with a share purchase plan for existing investors also launched to pull in up to $4m.

Resources in focus

Resources are cyclical and it is one area of the market where dividends can be fleeting, especially for the gold companies who dominate the Aussie market and are – by virtue of the short lives of gold mines – often capex heavy.

Hughes at Perpetual warned stocks that deliver high yield momentarily are not always sustainable investments.

“When dividend yields approach double-digit levels and seem too good to be true, it is often a sign that there may be issues ahead,” he said.

“In our process, we look for dividend sustainability. The factors behind that are the earnings growth of the business, balance sheet strength, cash flow generation, and the payout ratio.

“Is the dividend being supported by cash flow? Is there scope for the payout ratio to grow over time?”

Some juniors who have delivered fleeting high yields include iron ore miner Grange Resources (ASX:GRR) and coal junior TerraCom (ASX:TER), who found themselves on the nose again after booms in their respective commodities faded.

In order to secure access to dividends investors often look at the top end of the market, at companies like BHP (ASX:BHP), Rio Tinto (ASX:RIO), Fortescue (ASX:FMG), and more recently gold giants like Northern Star Resources (ASX:NST)  and Evolution Mining (ASX:EVN).

But outside those names there are a handful of companies that deliver regular payouts.

Here are a few that have delivered consistent returns, even with market caps as low as $300 million.

Red Hill has a swag of exploration assets across Australia, notably a farm-in with Spectre Metals in the emerging Curnamona Province of South Australia, viewed by many industry observers as the next great Aussie copper field.

It also claims its Broken Hill project across the border in NSW has tier-1 potential, with 2000m of follow-up drilling at the lead sulphide Dementus target due from October.

But the real interest in Red Hill is its royalty portfolio. Chief among that is the 0.75% share of revenue it claims on every tonne of iron ore shipped from Mineral Resources’ (ASX:MIN) flagship Onslow Iron project.

Red Hill shares are some way off their July 2024 highs of $7.80 (accounting for a recent share consolidation), but at $4.64 on August 13, they’ve grown more than four times over since striking the key deal that saw MinRes claim its stake in the Red Hill Iron Ore JV in 2021.

The Joshua Pitt-chaired junior paid out the cash proceeds from the deal long ago, $200 million on the agreement closing in 2021 which translated into a $1.20 per share fully franked dividend that year.

It made a host of other special dividends up to a $1.50 per share dividend paid out in July 2024, after the start of operations at Onslow triggered a second $200m payment from MinRes.

At the time there may have been doubts about the value of the trailing royalty, with scepticism over whether Chris Ellison’s MinRes could deliver on a trucking operation that could compete on costs with the port and rail infrastructure of its Pilbara neighbours – BHP, Rio Tinto, Fortescue and Roy Hill.

But deliver it did, hitting its 35Mtpa nameplate in August 2025. Unless iron ore prices really tank, RHI is sitting on a regular cash injection from which to pay out returns to shareholders.

It won’t match the $117.35m fully franked paid out in FY25, roided up by special dividends powered by the second $200m cash injection from MinRes.

But it is a rare thing, a junior with a formal dividend policy. The plan is to return 50% of the cash received from the Onslow royalty, at the discretion of the board.

If that is applied to the $28.8m generated from the asset in FY26, the yield generated by the ~$300m company clocks in at a touch under 5%.

There are other opportunities on the horizon: Red Hill acquired two more Aussie royalties in 2025, notably a 2% gross revenue royalty over Brightstar Resources’ (ASX:BTR) study-phase Sandstone gold project, previously held by prospectors Bruce Legendre and Stephen Stone.

The only ASX company based in Boulder, the less fashionable bottom half of Australia’s gold capital Kalgoorlie, Beacon is a quiet achiever when it comes to distributions.

Helmed by Kalgoorlie metallurgist Graham McGarry, it owns a series of small mines around Coolgardie in the WA Goldfields which collectively produce a modest level of around 25,000ozpa.

Consistency is the name of the game, with BCN regularly producing at around that level since opening the Jaurdi gold project in 2019. A pre-feasibility study on the Iguana deposit, released Thursday, suggests it could produce 379,190oz over nine years by treating through an expanded Jaurdi plant, an average of ~42,000ozpa.

At a market cap of just $383 million, rising gold prices have helped lift Beacon’s share price 136% in the past five years, with a 40:1 share consolidation helping provide liquidity for a register that was at one stage a who’s who of Kalgoorlie’s aristocracy.

And it’s had a formal dividend policy since 2020, paying its first in February 2021 in the form of a 0.7c per share unfranked dividend.

It has since made a total of nine capital returns to shareholders, the latest announced in June when Beacon made an $11.63m payout in the form of a 10c cash dividend – fully franked – along with an in-specie distribution of 36 million shares in Forrestania Resources (ASX:FRS), bringing the total return to $30.4m.

That came off the back of the sale of the MacPhersons Reward project to Dave Geraghty’s FRS.

It’s a special situation, but that puts the yield in Beacon on its current market cap at around 8%.

Last year it announced a buyback, but after a surge in gold prices boosted the firm’s share price it elected for a 5c per share dividend instead last November.

Beacon finished the last financial year with $20.69m in cash, with September production guidance of 5000-6000oz.

Deterra has one of the most predictable businesses on the ASX, drawing its income from a royalty over Mining Area C, the lynchpin of BHP’s (ASX:BHP) world-class WA Iron Ore division in the Pilbara.

Deterra, a spin-off of Iluka Resources (ASX:ILU), gets 1.232% of the Aussie-dollar-denominated quarterly FOB revenue from the MAC royalty area, along with one-off capacity payments of $1m for each one million dry metric tonne increase in annual production above the previous record.

One of a handful of royalty plays on the ASX, and by far the biggest, Deterra pulled in $164.2m in full-year profit in FY26 without having to spend a single cent extracting its product.

BHP produced a record 151.8 million wet metric tonnes at MAC, anchored by the 80Mtpa South Flank, which draws a premium from steel mills in China thanks to the lump content of its ore.

Sales were up 9% to 140.1m dry metric tonnes, offset by a slightly lower AUD iron ore sales price of A$135.8/dmt.

Underlying EBITDA came in at $222.2m, up 6% and a margin of 94%. What do with will all that extra cash? DRR has a policy to pay out 75% of NPAT.

It declared a 10.8c final dividend at the full year results, with a full year FY26 payout of 23.2c.

Deterra expanded its portfolio in 2024 with the acquisition of the UK’s Trident Royalties, which delivered among other assets a royalty over the next major US lithium mine, Thacker Pass. It’s due to be in production at the end of next year.

While its shares have only moved 6.3% higher in the past five years, DRR has historically yielded between 5-7.5% since 2022.

Gold stocks are typically poor dividend payers, outside of majors like Northern Star Resources (ASX:NST) and Evolution Mining (ASX:EVN).

But with gold prices at US$4350/oz, and having reached even higher in early 2026, margins are now strong enough for ASX goldies to be churning out serious volumes of excess cash.

Even Raleigh Finlayson’s Genesis Minerals (ASX:GMD), mid-takeover of Vault Minerals (ASX:VAU), surprised the market with a maiden 5c per share dividend on Thursday after printing a 147% gain in underlying NPAT to $546.9m.

$7.5bn capped Ramelius is some way off its highs as a producer, its output dropping from a record 301,664oz in FY25 to 192,182oz in FY26 as the sweet high-grade ore from its Penny and Cue satellite mines tailed off.

But it remains a growth stock thanks to a plan to hit 525,000ozpa by the end of the decade. Last year’s takeover of Spartan Resources will enable the incorporation of its Dalgaranga project and high-grade Never Never development with an expanded mill at Mt Magnet.

It is also planning to build a new mine east of Kalgoorlie at Rebecca-Roe. By FY29, RMS expects returns to shareholders to grow from $130.4m in FY25 (8cps) and $200m YTD in FY26 (which includes $141.7m from a share buyback) to $410m.

That assumes a 40% payout ratio, up from the current 30% policy, which would take the cumulative return from FY19-29 to $1.2782bn.

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