Notable funds in the area of ​​dividend increase

Obtaining dividend income from outside the UK has become a popular option for many investors in recent years. This is a trend driven by the pandemic and collapse of dividends paid by many UK companies.

This dividend quest has resulted in an increasingly popular investment fund with a wide range of global income. Income funds concentrated in specific regions and countries of the world, such as Asia, North America, Japan and emerging markets, are also of interest to investors.

Global dividends are expected to rise by nearly 11% this year, leading Europe, the United Kingdom and Asia Pacific, according to the latest data compiled by investor Janus Henderson.

Sunny Trends: Europe, UK and Asia Pacific Leading Global Dividends Expected to Increase by Nearly 11% This Year

An investment trust, which analyst Edison said “does what’s written on the can,” will confirm the buoyancy of Asian dividends when announcing this week’s annual earnings. Henderson Far East Income, one of the stable funds run by Janus Henderson, said it managed dividend growth for the 13th consecutive year.

Nevertheless, the expected 1.7% increase in annual dividend to 23.4 pence per share would be welcomed by income-hungry shareholders, offset by the poor overall performance of the trust. The stock closed at £ 2.96 on Friday.

Over the past year, three and five years, the fund has fallen behind its peers, recording only 3.9, 5.9 and 16.8% overall returns (capital and income), respectively. ..

In other words, the overwhelmingly poor stock price performance of the trust’s 40 holdings is hampering earnings returns.

In these same three periods, only for the past year, but only one trust listed on the same stock market, JPMorgan Asia Growth & Income, has an inferior record (longer period records). Is excellent).

As the table shows, all Asia Pacific Income Funds that are not listed on the London Stock Exchange outperform Henderson Far East Income in 1, 3, and 5 years. Mike Curly, who runs a £ 440m stock market-listed fund since 2007 (and more recently in collaboration with Sat Duhra), said the trust returns were “disappointing.” I admit.

“Going back to the pre-pandemic era, Trust’s total returns were in line with those of its peers,” he says. “But the slump in dividend yields as an investment strategy has hit confidence.”

Trust stocks currently yield close to 8%, which is an extraordinary number. This is especially true when compared to peers who have a more standard 4% yield.

According to Curly, the top 25% of profitable stocks across Asia currently stand at a 60% discount on other markets.

In other words, their stock prices are terribly depressed. This is the result of investors’ strong willingness to replace growth stocks such as Chinese tech giants Tencent and Alibaba, as well as companies involved in Net Zero Carbon’s commitment to the global economy. “There is a lot of hope built into the valuation of some of these growth stocks,” Curly warns.

He believes that at some stage there will be catalysts to reward fund managers like him who prefer to generate cash and focus on profitable and well-managed companies.

“It’s frustrating,” he adds, “but the background for our investment strategy to work for the benefit of shareholders is in place. It’s just a matter of waiting for changes in investor sentiment.” Told.

If the trust’s share price rises significantly, dividend payments will continue to increase, but yields of 8% will fall.

The trust portfolio has two major themes: mining and finance. Curly said the strong demand for commodities such as aluminum, copper, cobalt and nickel was partly driven by the greening of the global economy, a “big plus” for mining companies such as Rio Tinto and BHP, which are among the top 10 trustees. I think it is. ..

He argues that Asian financial stocks will work well and boost profits if interest rates rise as expected.

In recent weeks, trusts have reduced their exposure to Chinese equities against the backdrop of the expected economic slowdown caused by rising energy costs and rising commodity prices. Curly and Henderson Far East Income shareholders are patiently waiting for the cash-generating business in Asia to turn around again, but he believes the region’s dividend outlook is positive.

He states: “As a result of the pandemic, dividends in Asia fell by only 5%, but in the UK they fell by more than 30%. Economic growth, especially in the region, as Asian companies traditionally use low-margin dividends. If you are benefiting from, there is room for future dividend growth.

This is a view shared by fund witness Darius McDermott of Fund Calibre. He states: “Asia is one of the few regions in the world that provides investors with access to decent dividends. It is a vast region, embracing many world-class companies that are actually beginning to embrace the dividend culture. ..

“British investors who have plummeted will not only benefit from the diversification of their sources of income, but will also gain exposure to some of the best companies in growth mode.”

McDermott’s favorite funds in this area are Jupiter Asian Income, Guinness Asian Equity Income and Schroeder Oriental Income.

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Notable funds in the area of ​​dividend increase

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