Global Equity Income Investment Strategy

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 guided by our themes, fundamentals and valuation
: This strategy is offered by Newton Investment Management Ltd (‘NIM’). NIM is part of the Newton Investment Management Group.

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 behavioral 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.

Environmental, social and governance (ESG) considerations are integrated throughout the research process and via proprietary quality reviews, to ensure that any material issues are captured.

A constantly evolving and forward-looking approach seeks to anticipate change, manage risk, and identify opportunities.

Investment Team

Our Global Equity Income strategy is managed by our equity income 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.

27: years’ average investment experience
24: years’ average time at Newton

James A Lydotes

Head of equity income and deputy chief investment officer, equity
Jon Bell

Portfolio manager, global equity income
Robert Hay

Portfolio manager, global equity income
John C Bailer

Deputy head of equity income, portfolio manager
Brian Ferguson

Portfolio manager, equity income team
Peter D Goslin

Portfolio manager, equity income team
Keith Howell Jr.

Portfolio manager, equity income team

Strategy Profile

Objective: The 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 global portfolio comprised of companies that typically yield at least 25% greater than the FTSE World Index yield.
Performance benchmark: MSCI World NDR Index (total return), FTSE World Index (yield criteria)

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 size: US$5.4bn (as at March 31, 2023)
Strategy inception: January 1, 2006

Quarterly factsheet

Facts on the strategy’s performance and positioning.

Download Factsheet

Responsible investment report

Stewardship activities (voting and engagement) for the last quarter and ESG metrics.

Download Report

Brochure

More detail on the strategy’s investment approach.

Download Brochure

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.

The outperformance target stated is net of fees, for indicative purposes only, and may be changed without notice. Targeted return is generally aspirational in nature, not necessarily based on criteria and assumptions, and is not a guarantee of future returns.

Newton will make investment decisions that are not based solely on ESG considerations. It is one of 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.