Many fund managers have been unable to wean themselves off Zoom since the dark days of lockdown.
So, it was heartening to rock up at the packed Fortnum & Mason store in London ten days ago and see the joint managers of Guinness Global Equity Income explain their investment strategy in the flesh.
With the prospect of tea and finger sandwiches, investors – some of them wannabe investors – hung on every word as Ian Mortimer and Matthew Page explained the fund’s strategy. The managers also gave a rundown on the difficult economic backdrop.
Despite the lingering issue of inflation that refuses to go away, the pair gave a rather upbeat assessment of the fund’s prospects.
In a nutshell, this year and next should deliver continued dividend growth for investors. Attendees went away contented on all fronts.
The £3.6 billion fund has an excellent investment record. Since 2011, there has only been one year – 2020 – when the managers have not been able to furnish investors with growing dividends.
Although the fund’s relative performance against its peer group has been underwhelming over the past year, it has still managed to extract a small positive total return (capital and income) for investors of 4.3 per cent.
Over the past three, five and ten years, it has comfortably outperformed, generating respective returns of 30, 63 and 152 per cent.
Mortimer and Page are disciplined in the way they run the fund. Unlike other managers, they prefer to spread the assets equally across holdings.
This means that profits in the best performing companies are taken regularly to rebalance the portfolio. It also results in a portfolio – comprising 35 stakes – where every stock matters.
Although the focus is on dividends, the companies which end up in the portfolio are selected primarily for their potential to generate profits through thick and thin.
All companies purchased by the fund must have a minimum market capitalisation of $1 billion (£794 million) and have strong balance sheets.
Firms in declining industries are off limits as are businesses paying an unsustainable dividend to shareholders. Businesses not on their radar are banks, real estate companies and utility stocks.
All these requirements result in a pool of 600 companies from which Mortimer and Page can fish. Current holdings include well established brands such as US drinks giant Coca-Cola.
They also include lesser-known names such as Australian-listed Sonic Healthcare and French digital automation specialist Schneider Electric.
The dividends currently generated by the fund equate to a modest annual income of 2.1 per cent. But dividend growth is the name of the game.
This year, 31 of the fund’s holdings have increased their dividends while only one – US footwear company VF Corporation – has cut them. The average increase equates to a tickle above six per cent.
After the Fortnum egg and cress fingers were consumed, Mortimer told me in person the fund’s prospects for next year were promising.
He said: ‘We expect dividend growth for the companies we own to accelerate. Balance sheets remain robust with our companies having taken advantage of the low interest regime post-pandemic to issue debt with low coupon rates with long maturities.
With global economic growth having outperformed this year, inflation coming down and robust pricing power, the profit margins of the companies we hold have been relatively stable while revenues have grown. This gives the businesses the ability to both reinvest for growth and increase their dividends.’
An upbeat ending to a rather enjoyable afternoon.
