And the winner of the Global Equity Income award is...
1-year return: 11.8%
3-year return: 50.9%
M&G Global Dividend is a newcomer to our awards, taking the top spot as the Best Global Equity Income fund. The top performer in its sector over three years, it has a relatively low yield of 2% which, importantly, it aims to grow over time.
The £2.48 billion fund benefits from the talent and experience of growth-oriented investor Stuart Rhodes, lead manager since its inception in 2008. He aims to provide combined income and capital growth that is higher than that of the global stockmarket as measured by the MSCI ACWI index over any five-year period, and to increase the absolute dividend distributed to investors every year. It stands to reason that companies not growing their dividends are unlikely to be found in this portfolio regardless of how high their current yield may be.
Rhodes invests in shares from across a wide range of countries, sectors and company sizes. The US accounts for half of assets, with smaller allocations to the UK, Canada and Switzerland among others. He usually holds less than 50 stocks (44 at present) with different sources of dividend growth, to build a fund that has the potential to cope in a variety of market conditions.
He and his team of three divide the portfolio into three core buckets of stocks with different characteristics: ‘quality’, ‘assets’ and ‘rapid growth’. The quest for growing dividends can tilt the portfolio towards cyclical stocks, medium-sized companies and occasionally emerging markets. This can lead to a rockier performance profile over shorter periods, but longer-term returns have been remarkably consistent.
HIGHLY COMMENDED FUND
A long-standing member of our Rated Funds, Guinness Global Equity Income takes a place in our awards this year thanks to its consistently solid performance. The portfolio’s focus on quality businesses rather than yield differentiates it from peers.
Ian Mortimer and Matthew Page, managers of the fund since launch in 2010, build a concentrated portfolio of 35 equally-weighted stocks from a pool of companies that have achieved a 10% return on capital in every year over the last decade.
This reduces stock-specific risk and instils a strong sell discipline; they must sell a position to make way for a new one, so constantly assess the companies they own relative to the rest of their universe.
Targeting dividend growers for longer-term returns