View more on these topics

Schroder stocks up on high yielding equities

Schroders has introduced its global equity income fund, an Oeic that aims for a rising level of income and capital growth by investing in high yielding stocks around the world.

The company says that although UK equity income funds have been popular for a long time, 90 per cent of stocks proving an income of at least 3 per cent are found outside the UK.

According to Schroders, the conventional view is that companies either pay high dividends or grow their business, but not both. It is challenging this view by looking for companies produce a high dividend while maintaining growth, enabling the fund to target a yield of 2 per cent above the MSCI World All Countries index a year.

Sonja Schemmann, who joined Schroders in December 2005, will manage the fund. She previously ran the top dividende global yield fund at DWS.

When selecting stocks Schemmann will not be constrained by benchmark weightings. She will produce a short list from a universe of 5,600 stocks and this will be narrowed down to a portfolio of her 80 best stock ideas. Over 200 analysts and experts will support her across 27 countries.

Schroders believes that dividends are attractive because companies have a lot of cash, which may also be used for reinvestment and share buybacks. Also, debt is reasonable and balance sheets are in good shape.

Schroders expects earnings growth to slow and believes companies that find a balance between dividend payments to shareholders and how much they spend on investment or acquisitions are most likely to outperform.

IFAs and their clients may welcome more choice in the global income fund market, which is an area that UK fund management groups have started to explore. However, investors should be aware that as with many equity income funds, the charges are made to the capital to maximise the income, but this could constrain future growth.


Recommended

Halo, goodbye

Fee-based advisers are under attack for having ‘holier than thou’ attitudes, says Nicole Blackmore.

Newsletter

News and expert analysis straight to your inbox

Sign up

Comments

    Leave a comment