Hunting for the dividend is a strategy used by many investors who, in this way, seek to have an assured income. However, when selecting the companies, the experts remember that it must be clear that the dividend that the company pays is constant and growing.
The investment fund industry offers a wide range of products for all those who prefer to diversify through these products but with the dividend as a reference. Within the dividend funds there are two categories: those of distribution and those of accumulation.
In the first, the dividends charged by the vehicle are delivered periodically to the owners of the fund, so that they can obtain a regular income. This format has the drawback that the individual has to pay taxes for the collection of that rent. The payment of this income can be monthly, quarterly or annually, depending on the fund. In the case of accumulation funds, the vehicle uses the dividends it collects to buy new shares.
Isabel Sánchez Burgos, portfolio manager at Arquia Gestión, explains that “in the current environment of uncertainty, dominated by high inflation, the risk of recession and high volatility, the search for income has become a necessity for investors”. The expert comments that, although it is true that these types of funds “are not immune to stock market crashes, they generally offer better resistance to stock market fluctuations and have a more defensive approach”.
In fact, his behavior this complicated year is being much more positive than other categories. Just look at the evolution of the S&P 500 and the S& P 500 Dividend Aristocrats.
The generic has done twice as bad as the other. The first falls 18% while the second yields 9% this year. Within the funds, some of those that bet on this strategy even achieve double-digit returns in 2022.
Some of the Schroders funds that invest in companies with good dividends and also the JP Morgan Investment Funds Europe Strategic Dividend Fund they post attractive returns in times of stock market losses in all markets. The JP Morgan vehicle yields 12% in the year but offers an annualized return in the last ten years of 4.9%.
Apart from the most profitable, the portfolio manager of Archie Management make your own selection. “We like those funds that, from a global perspective, invest in quality companies with attractive dividend yields but, above all, that are sustainable over time.”
From this point of view, they bet on BNY Mellon Global Equity Income. This product invests globally in some 70 stocks, with a dividend yield perspective of 25% higher than that of its reference index. Look for companies with solid fundamentals and a cheap valuation. It achieves a return of 3% in the year and has a return in the last ten of 9%, according to data from Morningstar. Pepsi, BlackRock, British American Tobacco, Cisco Systems and RELX are the main positions.
Another one of your choices is Guinness Global Equity Income Fund –which invests, also globally and with a more value approach, in some 30 equally weighted positions, with a preference for those firms with a return per dModerate living but with growth prospects. The product has a more defensive profile. AbbVie, Arthur J. Gallagher, Johnson & Johnson, Aflac and Deutsche Börse are some of the values in which the vehicle invests.
Finally, DWS Top Dividend is another recommendation. This fund invests globally, although more focused on Europe and the US, in large capitalization companies that are expected to offer a dividend yield higher than the market average, being the fundamental thing for the management team that this profitability be reliable, stable and sustainable.
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