HEAD-TO-HEAD: Eastspring versus Schroders

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Samuel Lo, senior manager research analyst, Morningstar

Introduction

This year’s volatility and sharp decline in asset prices has prompted investors to reengage with areas of the market they had previously overlooked.

Sectors such as consumer staples and utilities, for example have fallen less precipitously compared with broader market indices as investors bet that cash-strapped consumers prioritise basic necessities such as medicine and food.

One beneficiary this year of the search by investors for more stable income streams has been dividend stocks. The ProShares S&P Dividend Aristocrat ETF, which invests in shares of companies that have raised dividends annually for at least 25 years, has recorded positive inflows this year.

Often overlooked in recent years in favour of growth names, its proponents argue that dividend stocks help protect portfolios against equity declines, while at the same time they offer a steadier source of income compared with fixed income, which gets eroded by higher prices.

Historical data suggests that dividend stocks tend to do better in high inflation environments as well. There are also ample opportunities for investors to tap into as companies in the MSCI AC World Index paid in excess of $1.3trn in dividends for the 12 months to March 31.

Many dividend funds nowadays also invest in growth stocks as well so its proponents argue that this diversification can provide a neat hedge against volatility, while offering investors exposure to both structural and cyclical growth.

Against this backdrop, Samuel Lo, senior manager research analyst at Morningstar, selected the Eastspring Investments Asian Equity Income Fund and the Schroder International Selection Fund Asian Equity Yield for comparison.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 16 November 2022)

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