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A high-conviction global strategy with an investment approach which aims to capture and enhance the most statistically significant source of long-term real returns – the compounding of dividends through time
Strategy highlights
Aims to deliver an attractive total return over the long term, pursuing an asymmetric return profile (low downside market capture)
Disciplined approach seeks to ensure that every stock and the overall portfolio compounds at a higher yield than that of the market, and that dividends are underpinned by sustainable cash-flow streams
A global investment universe offers investors an opportunity to diversify their equity investments. Active stock selection is informed by our consideration of themes, fundamentals and valuation
Our philosophy and process
Our investment philosophy acknowledges that investing is inherently probabilistic in nature. We believe a focus on dividend sustainability leans the statistics to our advantage, reflecting the powerful evidence that dividends, and the reinvestment of dividends, represent the dominant sources of long-term real returns in markets across the world. Compelling evidence also suggests those companies with the discipline of paying a dividend tend to allocate capital more efficiently and maintain better earnings growth.
The disciplines of our investment process aim to capture and enhance the statistical tailwind of dividends in three ways. First, our strict yield discipline seeks to ensure that every stock and the portfolio as a whole always compound at a higher yield than that of the market. This provides an objective discipline which prevents stock ‘love affairs’ and other behavioural impediments. Second, we look to enhance this tailwind by ensuring underlying cash flows are sustainable and have the ability to suffer without threatening the dividend. Third, we aim to enhance this further still by capturing a valuation margin of safety.
Individually, these three features of yield, dividend sustainability and valuation are statistically attractive and easy to find. However, in combination they are rare and typically require some element of controversy. Our process therefore focuses on identifying key ‘buckets’ of controversy where we believe the market repeatedly offers up such opportunities.
Material and relevant ESG risks, issues and opportunities are considered as part of the investment process.
A constantly evolving and forward-looking approach seeks to anticipate change, manage risk, and identify opportunities.
Strategy profile
Objective
The strategy seeks to outperform the FTSE World Index by more than 2% per annum over rolling 5-year periods on a total-return basis, by achieving income and capital growth from a global portfolio comprised of companies that typically yield at least 25% greater than the FTSE World Index yield.
Performance benchmark
FTSE World Index
Typical number of equity holdings:
40 to 70
Yield discipline:
Every new holding in a global equity income portfolio typically has a prospective yield 25% greater than the benchmark at the point of purchase. Any holding whose prospective yield falls below the benchmark yield will trigger our sale discipline process.
Strategy inception:
1 January 2006
Investment team
Our Global Equity Income strategy is managed by an experienced team. In-house research analysts are at the core of our investment process, and our multidimensional research platform spans fundamental, thematic, ESG, quantitative, geopolitical, investigative and private-market research to promote better-informed investment decisions.
Head of equity income and deputy chief investment officer, equity
Jon Bell
Portfolio manager, Equity Income team
Robert Hay
Portfolio manager, Equity Income team
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Welcome to WordPress. This is your first post. Edit or delete it, then start blogging!
Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.
Newton will make investment decisions that are not based solely on ESG considerations. Those considerations are among many inputs into the fundamental analysis. Other attributes of an investment may outweigh ESG considerations when making investment decisions. The way that material ESG considerations are assessed may vary depending on the asset class and strategy involved. As of September 2022, the research team performs ESG analysis on equity securities prior to their addition to Newton’s Research Recommended List (RRL). ESG reviews are not performed for all fixed income securities. The portfolio managers may purchase equity securities that are not included on the RRL and which do not have ESG reviews. Not all securities held by Newton’s strategies have an ESG review completed prior to investment.
Key investment risks
Objective/performance risk: There is no guarantee that the strategy will achieve its objectives.
Currency risk: This strategy invests in international markets which means it is exposed to changes in currency rates which could affect the value of the strategy.
Derivatives risk: Derivatives are highly sensitive to changes in the value of the asset from which their value is derived. A small movement in the value of the underlying asset can cause a large movement in the value of the derivative. This can increase the sizes of losses and gains, causing the value of your investment to fluctuate. When using derivatives, the strategy can lose significantly more than the amount it has invested in derivatives.
Emerging markets risk: Emerging Markets have additional risks due to less-developed market practices.
Concentration risk: A fall in the value of a single investment may have a significant impact on the value of the strategy because it typically invests in a limited number of investments.
Liquidity risk: The strategy may not always find another party willing to purchase an asset that the strategy wants to sell which could impact the strategy’s ability to sell the asset or to sell the asset at its current value.
High yield companies risk: Companies with high-dividend rates are at a greater risk of being able to meet these payments and are more sensitive to interest rate risk.
Counterparty risk: The insolvency of any institutions providing services such as custody of assets or acting as a counterparty to derivatives or other contractual arrangements, may expose the strategy to financial loss.
Individual Investors will be redirected to bnymellon.com
This is a financial promotion. Issued by Newton Investment Management Limited, The Bank of New York Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England No. 01371973. Newton Investment Management is authorised and regulated by the Financial Conduct Authority, 12 Endeavour Square, London, E20 1JN and is a subsidiary of The Bank of New York Mellon Corporation. Newton is providing financial services to wholesale clients in Australia in reliance on ASIC Class Order 03/1099, a copy of which is on the website of the Australian Securities and Investments Commission, www.asic.gov.au. The Class Order exempts entities that are authorised and regulated in the UK by the FCA, such as Newton, from the need to hold an Australian financial services license under the Corporations Act 2001 for certain financial services provided to Australian wholesale clients on certain conditions. Financial services provided by Newton are regulated by the FCA under the laws and regulatory requirements of the United Kingdom, which are different to the laws applying in Australia.
Material in this publication is for general information only. The opinions expressed in this document are those of Newton and should not be construed as investment advice or recommendations for any purchase or sale of any specific security or commodity. Certain information contained herein is based on outside sources believed to be reliable, but its accuracy is not guaranteed. You should consult your advisor to determine whether any particular investment strategy is appropriate. This material is for institutional investors only. Past performance is not a guide to future performance. Your capital may be at risk. The value of investments and the income from them can fall as well as rise and investors may not get back the original amount invested.
This material is for Australian wholesale clients only and is not intended for distribution to, nor should it be relied upon by, retail clients. This information has not been prepared to take into account the investment objectives, financial objectives or particular needs of any particular person. Before making an investment decision you should carefully consider, with or without the assistance of a financial adviser, whether such an investment strategy is appropriate in light of your particular investment needs, objectives and financial circumstances.
This information is made available by Newton and BNY Mellon Investment Management Australia Ltd (AFSL 227865). This information is confidential and is only provided to Australian wholesale clients (as that term is defined in section 761G of the Corporations Act 2001 (Cth)). This is not an offering or the solicitation of an offer to purchase an interest in any financial product referred to in this website. This content is for general purposes only and should not be relied upon as financial product advice. This content has been prepared without taking into account the objectives, financial situation or needs of any person. Before making an investment decision an investor should consider the appropriateness of the information in this website having regard to these matters and read the disclosure document relating to a financial product. Investors should also consider obtaining independent advice before making any investment decisions. Investments can go up and down and to the extent that this website contains any past performance information, past performance is not a reliable indicator of the future performance of the relevant investment or any similar investment strategy.
Newton Investment Management Limited is exempt from the requirement to hold an Australian financial services licence in respect of the financial services it provides to wholesale clients in Australia and is authorised and regulated by the Financial Conduct Authority of the UK under UK laws, which differ from Australian laws.
