14
DAN ROBERTS
PORTFOLIO MANAGER FIDELITY GLOBAL DIVIDEND AND
GLOBAL ENHANCED INCOME FUNDS SHARES HIS STRATEGY
The dividend-paying share
universe is widely represented
across the globe and good quality
companies can now be found paying
well-covered dividends in a range of
sectors and geographies. Investing
globally provides the flexibility to go
where dividends are growing around
the world. Also, importantly, in times
of market volatility, a global equity
income fund can offer a relatively
stable source of return and income
thanks to the dividend.
Companies with a track record of
paying dividends are often more
predictable and resilient businesses,
which mean their returns can be less
volatile than the wider equity market.
Don’t overlook Japan
Japan is home to a number of
conservatively-managed companies
with strong balance sheets, many
of whom are leaders within their
respective industries or niches.
As such, the region provides good
opportunities for bottom-up stock
pickers.
Healthcare company Astellas Pharma
is a key holding and a good example
of a stock which I believe provides the
portfolio with a high quality income
stream.
The company has strong franchises
in its core business of urology and
transplantation, and its collaboration
with US company Medivation on a
drug called Xtandi for prostate cancer
offers real potential for significant
growth. I have owned the stock since
the Fidelity Global Dividend Fund
launched in January 2012 at which
point the dividend yield was 4%.
Stock price appreciation has
compressed the yield to around
2% but the underlying valuation
is still attractive and I believe the
current dividend payout has room
to grow materially. Management are
shareholder friendly with a good
track record of dividend growth and
periodic buybacks.
At the market level, it is important to
appreciate that Japanese stocks have
been steadily de-rated for some 25
years. Of course, starting valuations
in the late 1980s were egregiously
high and explain in large part the poor
relative returns we have seen since
that time. However, valuations today
are now back ‘in the pack’ and the
opportunity for stock selection is, in
my opinion, very good.
There are also encouraging, if nascent,
signs of change – mooted reductions
in corporate tax rates, long overdue
restructuring and even the occasional
announcement of share buybacks. As
such, I think Japan is a region which
shouldn’t be overlooked within a
global equity income portfolio.
EMERGING MARKETS
A glance at the geographic split of the
Fidelity Global Dividend and another
Fidelity fund - Global Enhanced
Income fund - by company domicile
shows only a modest 2% allocation to
emerging markets.
However, the overall exposure is
higher than this number would
suggest due to a number of holdings
in developed markets – companies
such as Sanofi and Unilever – deriving
a high percentage of their revenues
from emerging economies.
Although this ‘indirect’ exposure isn’t
captured in the headline statistics,
understanding the geographic split
of revenue streams of holdings in the
portfolio is an important part of my
analysis.
GOING GLOBAL IN THE HUNT FOR SUSTAINABLE DIVIDENDS
