Interest rates in most developed countries have been at historic lows for more than a decade. Many investors have turned to dividend-paying companies to boost their income, only to have the pandemic come along and reduce those, too. Between March and ecember 2020, two-thirds of companies in the UK cancelled or cut their payouts1.
Cuts have also been rife in Europe and Australia, but one area where they have been resilient is in Asia and emerging markets2. Dividend payments are still at an early stage in these regions, meaning there is scope for growth in payments over the long term.
With this in mind, here are four dividend-paying stocks our Elite Rated managers are backing.
Stock pick at Guinness Global Emerging Markets Income Fund
Tech Mahindra is an Indian IT consultancy with a good track record of dividend growth. Guinness Emerging Markets Equity Income Fund co-manager Mark Hammond says: “The company has a strong franchise in telecom consulting, which has seen greater demand as telecom providers have started to adopt 5G.
“Another key trend is increased spending on IT services as a result of technological shifts accelerated by the pandemic. Companies are increasingly looking to transfer processes and software applications to the cloud, and this migration has provided broad benefits to the IT services sector.”
Stock pick at Murray International Trust
Hon Hai Technology Group (Foxconn) is the world’s largest electronics manufacturer, with the Apple iPhone, Amazon Kindle, PlayStation and Nintendo game consoles in its stable.
Murray International manager Bruce Stout says: “By capitalising on its expertise in cloud computing, mobile devices, internet of things, big data, artificial intelligence (AI), smart networks and robotics / automation, the group has expanded not only its capabilities in the development of electronic vehicles, digital health and robotics, but also artificial intelligence, semiconductors and new-generation communications technology – which are crucial to driving long-term growth.”
Stock pick at Magna Emerging Markets Dividend
According to Magna Emerging Markets Dividend manager Ian Simmonds, Chinese heavy-duty truck (HDT) engine manufacturer Weichai Power is highly correlated with infrastructure growth in China.
He says: “Historically, heavy industrial machinery has been viewed as a very cyclical sector and valued accordingly. Greater focus on new energy sources and a shift from construction exposure to logistics should begin to remove the cyclicality from the business, allowing it to continue re-rating.”
Stock pick at Fidelity Global Dividend Fund
The Taiwan Semiconductor Manufacturing Company (TSMC) is the go-to business for computer chips for the likes of smartphones, AI and other highperformance computing needs.
The firm is a top 10 holding in the Fidelity Global Dividend Fund, and manager Dan Roberts says: Semiconductor manufacturing is extremely capital intensive and demands continuous research and development. This gives TSMC a deep competitive moat around its franchise and means it should be able to reinvest capital at high rates of return well into the future.
“The company’s manufacturing process is enabling many of the most exciting technological innovations, such as AI, autonomous vehicles and the internet of things.”
1Link Group, Global Dividend Monitor, Q4 2020.
2Janus Henderson Global Dividend Index, November 2020.
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of Juliet and the fund managers and do not constitute financial advice.