M&G Global Dividend Fund

Transcription

1 M&G Global Dividend Fund 1 Stuart Rhodes, Fund Manager September 2017

2 Agenda 1. Dividend investing our philosophy and approach 2. Quality our defensive bucket 3. Assets our cyclical bucket 4. Rapid growth our growth bucket 5. Outlook 2

3 Dividend (pence) 1. Dividend investing Our philosophy: focus on dividend growth Dividend (stock yielding 6%, no growth) Dividend (stock yielding 4%, 10% growth) The power of long-term compounding 3 Source: M&G, Illustrative figures only

4 1. Dividend investing Our approach: picking stocks from three distinct categories Sources of dividends (typical weighting)* Company characteristics Dividend profile Quality (50-60%) Disciplined companies with reliable growth Assets (20-30%) Asset-backed cyclical companies Rapid growth (10-20%) Structural growth driven by geography or product line Designed to cope with different market conditions 4 Source: M&G, *Internal guidelines subject to change

5 Fund weighting 1. Dividend investing Three sources of dividends 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Quality 44.7% Assets 28.4% Rapid growth 21.2% Sale at right price 4.6% Cash 1.1% Quality exposure remains low relative to history 5 Source: M&G, 31 July 2017

6 6 Quality

7 Share price (pence) Share price (pence) 2. Quality (consumer staples) Tobacco stocks underperformed in July in response to the US regulator BAT Imperial Brands Taking profits reduced holding by almost 25% Added on weakness Added on weakness Topped up marginally Both companies raised their dividends by 10% 7 Source: Datastream, 31 August 2017

8 2. Quality (consumer staples) Valuation matters Stock P/E multiple (year 2) EPS growth (average over next 2 years) Dividend growth Dividend yield BAT 15.6x +10% +10% 3.4% Imperial Brands 11.4x +5% +10% 5.3% Procter & Gamble 22.1x +7% +2% 3.0% Nestle 21.9x +8% +2% 2.8% Coca-Cola 23.1x +7% +6% 3.1% Diageo 21.6x +8% +5% 2.4% Colgate-Palmolive 22.9x +8% +3% 2.2% Tobacco looks attractive but other consumer staples still look expensive 8 Source: Bloomberg, 14 August 2017, Datastream, 31 July 2017

9 2. Quality (consumer staples) Food stocks have started to roll over Share price relative to S&P 500, 2017 YTD General Mills Kraft Heinz Kellogg 105 Campbell Soup Disappointing fundamentals are no longer being ignored 9 Source: Datastream, 31 August 2017

10 2. Quality (healthcare) Finding value in pharma again Fund weighting in healthcare (%) 25 Sector exposure almost all pharma More diversified exposure Adding selectively to pharma again Aug-17 Sector s underperformance in 2016 has presented opportunities 10 Source: M&G, 31 August Image copyright Clipart

11 11 Assets

12 EBITDA C$m EBITDA C$m EBITDA C$m 3. Assets (energy related) Energy infrastructure % 21% C$342m C$296m C$244m 2016A 2017E 2018E 2,500 2,300 2,100 1,900 1,700 1,500 1,300 1, % C$2,426m 39% C$1,650m C$1,189m 2016A 2017E 2018E % C$788m 6% C$643m C$605m 2016A 2017E 2018E Dividend growth +0% Yield 8.1% Dividend growth +6% Yield 4.8% Dividend growth +6% Yield 4.3% Fundamentals remain intact and yields attractive 12 Source: EBITDA estimates and dividend growth Bloomberg, 14 August Dividend yields Datastream, 31 July Image copyright imantsu / Shutterstock.

13 3. Assets (energy related) Company engagement Gibson Energy: Letter to the Chairman Clarify long-term strategy Focus on core infrastructure assets Reliable and growing cashflows Strategic value Track record of profitable growth Sell non-core assets At an appropriate value Recycle proceeds Reduce debt Reinvest in high return infrastructure projects Methanex: US regulatory filing (13D) Specify use of free cashflow Substantial cash generation End of capex programme Methanol price recovering towards $400 per tonne Dividend growth 9% increase announced in April Welcome but in line with history Share buybacks Opportunity to create huge value for shareholders Significant discount to replacement cost Strategic review: Explore all options to maximise value, including a sale of the company Buy back more stock: 5% programme announced in March upgraded to 10% in July Active management to maximise value for shareholders 13 Source: M&G, 31 August 2017

14 Rebased to 100 as at 18 July Assets (energy related) Methanex Methanex: Total return m shares m shares m shares Maximising exposure at share price lows 14 Source: Datastream, M&G, 31 August Fund launched 18 July 2008

15 3. Assets (non-energy related) Not confined to energy-related holdings +10% +11% +20% +7% +3% Dividend growth from industrial end markets 15 Source: Bloomberg, 31 August 2017

16 16 Rapid growth

17 Dividends (US$) 4. Rapid growth Broadcom (originally Avago Technologies) Broadcom: Dividend track record and share price performance 2.0 $ $ $ $150 $100 $50 $0 Share price (US$) 17 Source: Bloomberg, Datastream, 31 August 2017 Dividend Share price Share price has increased five fold over four years, while the dividend has quadrupled

18 Fund weighting (%) 4. Rapid growth Highest weighting since fund launch A strong year of idea generation in 2016 and we continue to refresh the portfolio in 2017 Source: M&G, 31 July 2017

19 4. Rapid growth New purchases in 2016 and 2017 YTD Stock Sector Country Dividend growth 2017 Dividend growth 2016 Dividend growth 2015 MasterCard Technology US +16% +19% +45% Visa Technology US +18% +17% +20% St. James s Place Financials UK +18% +20% +46% Nike Consumer discretionary US +13% +14% +17% AIA Financials Hong Kong +23% +40% +18% Intercontinental Exchange Financials US +18% +13% +15% ASML Technology Netherlands +14% +50% +15% A collection of different growth drivers 19 Source: Bloomberg, 31 August 2017

20 Jan-16 Feb-16 Mar-16 Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16 Oct-16 Nov-16 Dec-16 Jan-17 Feb-17 Mar-17 Apr-17 May-17 Jun-17 Jul-17 Aug-17 Rebased to 100 as at 3 December Rapid growth Las Vegas Sands Total return 220 Macau: Monthly gross gaming revenue (YoY change) 40% m shares 30% m shares 20% 10% 140 0% % m shares -20% 80-30% Taking profits into recovery 20 Source: Bloomberg, Datastream, 31 August 2017; Macau GGR data from DICJ (Gaming Inspection and Coordination Bureau Macau), 31 August 2017

21 21 Outlook

22 5. Outlook Dividend announcements in 2017 YTD 15%+ 5-15% <5% Dividend cut Pandora 177% JP Morgan Chase 12% Wells Fargo 3% Imperial Holdings St. James s Place 25% Cisco Systems 12% Arthur J Gallagher 3% UnitedHealth 20% Kone 11% Legrand* 3% Trinseo 20% BAT 10% Novartis 2% Novo Nordisk 19% Methanex 9% AIA 17% Blackrock* 9% Publicis 16% Sabre 8% US Bancorp 7% Medtronic 7% Pembina Pipeline 6% Keyera 6% LyondellBasell* 6% Johnson & Johnson 5% Amcor 5% *Sold since dividend announcement Continued progress from our holdings 22 Source: M&G, 31 August 2017

23 5. Outlook Building on our track record 7.0p Total return % 300 Capital return % 6.0p Annual distribution per share (rhs) 5.0p 4.0p 3.0p 2.0p 1.0p Returns (rebased to 100 at 18 July 2008) 0.0p * 0 A rising income stream on a yield premium 23 Source: Morningstar Inc., UK database, 31 July 2017, sterling I class shares, income reinvested, price-to-price. Fund launched 18 July *Distributions paid for the year ending March. Sterling share class. Note sterling share classes may not be registered for sale in all regions.

24 Summary M&G Global Dividend Fund Focus on dividend growth, not yield Our philosophy and process remains unchanged Compelling opportunities across the portfolio Tobacco and healthcare look attractive in quality Core holdings in assets have room for considerably more upside New ideas in rapid growth Dividend growth remains robust across our holdings The majority continue to deliver 5% to 15% increases Favourable combination of rising income and attractive valuation 24

25 The fund invests mainly in company shares and is therefore likely to experience larger price fluctuations than funds that invest in bonds and/or cash. 25 The value of investments will fluctuate, which will cause fund prices to fall as well as rise and investors may not get back the original amount invested. For financial advisers only. Not for onward distribution. No other persons should rely on any information contained within. This financial promotion is issued by M&G Securities Limited which is authorised and regulated by the Financial Conduct Authority in the UK and provides ISAs and other investment products. The company s registered office is Laurence Pountney Hill, London EC4R 0HH. Registered in England No