Ben Sheehan, abrdn
Investor risk appetite remains strong, with major indices often hitting or nearing new highs. “This is a golden era for equity allocations,” Ben Sheehan, senior investment specialist for equities, Asia Pacific at abrdn told FSA.
Equities offer both capital growth potential and dividend income, and their “relative attractiveness over fixed income is well known. Not only are bond yields scarce, but a rising yield backdrop could spell headwinds for total returns. By contrast, the outlook for dividends is positive,” he added.
The global economic revival has driven a recovery in company earnings, which is supportive of dividend pay-outs. In the 12 months to end-September last year, the global equity universe paid in excess of $1.2trn in dividends, highlighting the wealth of income opportunities for investors, according to Sheehan.
Sheehan manages the $214.6m Aberdeen Standard Global Dynamic Dividend Fund, which was launched in October 2020. Since its inception, it has generated a cumulative return of 25.84%, in US dollars, underperforming its benchmark MSCI ACWI (27.83%) during the same period, but outperforming its sector average (24.16%), according to FE Fundinfo.
According to the fund’s factsheet, as at 30 November 2021, 52.2% of the fund is invested in the US. Its top five holdings are Apple, Microsoft, Alphabet, AbbVie and Broadcom, and its biggest sector exposure is to information technology (17.3%), financials (16.2%), healthcare (11.8%) and industrials (9.5%).
“Country weightings are a reflection of our bottom-up selection process. The US is the world’s largest equity market and has also been the best performing major equity market over the last decade,” Sheehan explained.
US tilt gives global exposure
Buying US-listed companies does not just mean exposure to the domestic US economy, according to Sheehan.
“Many of our US holdings have globally diversified revenue streams. For example, about one-third of Apple’s revenue is sourced from China/Asia, while more than half of Microsoft’s revenue is sourced outside of the US. Ours is a global strategy so we invest wherever we find the best opportunities for capital growth and income,” he said.
The fund management team find dividend opportunities by using a system of screens and alerts. It has 120 investment professionals who cover thousands of companies, of which they currently rate 1,100 as a buy. “Many are good dividend payers, so that’s the fund’s starting point to build a portfolio with an attractive dividend yield profile,’ according to Sheehan.
Based on balance sheet cash, companies in the technology, consumer, communication, healthcare, industrial and financial sectors are best placed to pay dividends, he said.
“That said, we scour the global equity universe and have identified regular dividend-paying firms with strong fundamentals in other sectors too, such as energy and materials.”
Sheehan stressed that the firm has a detailed ESG agenda for each company that it researches. The team rate stocks using a proprietary ESG scoring system from 1-to-5 (1 being best, 5 worst), which helps it determine which firms make the grade for their portfolios.
Sheehan identifies two key risks that investors should be aware of: first, the omicron wave which present risks to growth and could cause supply-chain disruptions that create inflationary pressure; and second, the rising interest-rate environment will also present headwinds for equities, especially growth-oriented stocks.
Aberdeen Standard Global Dynamic Dividend Fund vs benchmark and sector average
