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FOUR REASONS WHY INCOME STOCKS LOOK ATTRACTIVE RIGHT NOW
Background
After the pandemic-induced and broad-based dividend cuts and suspensions of 2020, we witnessed a strong global dividend comeback over the last two years. But we believe there is more to come and see four key reasons why income-paying stocks should remain attractive for investors.
A Compelling Case
Newton CEO Euan Munro believes that as we enter a new investment era likely to be defined by uncertainty and volatility, having an active, discerning approach to equity income could be key in helping investors achieve attractive outcomes.
Company balance sheets remain strong and payout ratios have declined, meaning that dividends are well covered.
A Positive Shift in the Macroeconomic Environment
With structurally persistent higher inflation, as interpreted through our ‘big government’ and ‘great power competition’ macro themes, the flexibility for central banks to pivot and cut interest rates is greatly reduced. Income stocks tend to perform well during inflationary periods as they are able to raise their dividends, which helps to protect investors from the impact of that inflation.
Income Stocks Remain Inexpensive
We believe elevated valuations and more normalized earnings expectations should move the market focus back to dividends: a higher percentage of total return could come from dividends over the next decade.
Income Stocks Can Provide Diversification
During the post-pandemic recovery, income stocks demonstrated an ability to decouple from the lower-yielding growth stocks which had broadly driven markets, whenever the latter have come under pressure.
Our Income Strategies
Other Income Strategies
Explore our other income strategies such as US Equity Income and Global Infrastructure Dividend Focus Equity.
This strategy seeks to outperform the MSCI World NDR 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 portfolio comprised of companies that typically yield at least 25% greater than the FTSE W World Index yield.
The Newton Global Equity Income strategy has used the same consistent and disciplined approach to stock selection since inception in 2006.
MULTIDIMENSIONAL RESEARCH PLATFORM
Our team benefit from a toolkit like no other which combines fundamental security-specific research with other specialist insights including thematic, ESG-focused, quantitative and investigative research.
EXPERIENCED TEAM
The Global Equity Income strategy is run by three highly experienced portfolio managers with more than 70 years of combined investment experience.
Meet the Global Equity Income Team
James A Lydotes
Head of equity income and deputy chief investment officer, equity
Jon Bell
Portfolio manager, Equity Income team
Robert Hay
Portfolio manager, Equity Income team
Contact Us
If you are keen to learn more about our income capabilities, please get in touch.
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. Analysis of themes may vary depending on the type of security, investment rationale and investment strategy. Newton will make investment decisions that are not based on themes and may conclude that other attributes of an investment outweigh the thematic structure the security has been assigned to.
Newton Global Equity Income strategy – 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.
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