UK equity manager Mark Barnett says these types of company, that constitute the largest dividend payers in the UK market, are so globally focused they are not reliant on the fortunes of any one economy.
“The strength of their corporate profitability and the strength of their balance sheets, the likes of which I have almost never seen before, gives me a lot of confidence these companies are pretty secure and very unlikely to cut their dividends,” he said.
M&G Global Dividend manager Stuart Rhodes is another showing a preference for large global names. He categories the sources of dividends into three camps: quality, assets and rapid growth. Quality firms, which he describes as mega cap, multinational western firms, account for just over half of his fund. Alone his mega cap weighting is 34.9%.
Despite recent market rotation, Barnett doesn’t believe income stocks “are anywhere near fair value".
He added: "Right now I can find plenty of areas that remain significantly undervalued. There has been a change but it’s early days and has much further to run.”
Barnett’s colleague Stephanie Butcher, a European equities fund manager, echoes this sentiment with regards to her market. She notes she is finding many companies across all sectors on good valuations that offer “considerable” dividend growth opportunities.
She is quite optimistic on the dividend opportunities in Europe, particularly the pharmaceutical sector where she says dividends look quite sustainable.
