How strong is dividend growth in the US large-cap universe?

We believe that in 2018, dividend growth will still be in the high single digits, approaching 10%. A number of factors will help companies continue to grow cash flows, including tax reform, but overall economic growth and continued revenue growth from a lot of changes, such as the shift to digital in the economy and globalisation trends. e believe that in 2018, dividend growth will still be in the high single digits, approaching 10%. A number of factors will help companies continue to grow cash flows, including tax reform, but overall economic growth and continued revenue growth from a lot of changes, such as the shift to digital in the economy and globalisation trends.

We have seen companies who have already increased their dividends prior to their normal kind of cycle of raising dividends, because they like to maintain a payout ratio; companies like Altria and Six Flags have already raised their dividends. A number of other companies like Boeing and Intel and Comcast have accelerated their dividend growth as a result of this benefit to cash flows from the tax reform. We haven’t seen a lot of changes from the companies with big foreign cash holdings yet. We will look forward to Apple talking about that in April and other companies like Microsoft.

What factors are behind your optimism?

We continue to be very excited about the opportunities in equities, driven by a number of trends that continue to drive revenue growth opportunities for companies like this shift in the economy to digital and continued globalisation. Global travel continues to grow at very high rates, which is driving demand for Boeing airplanes and Honeywell Aviation Systems. This shift to digital continues to drive demand for cloud and ‘software as a service’ products from companies like Microsoft, Intel and Adobe. And this shift to digital is also driving the ability for companies with strong brand names to continue to be able to sell their products online, which has allowed them to accelerate growth.

We have seen Boeing invest in innovation and material science and in the engineering process to make their planes more efficient, which has driven more demand for their airplanes for replacement demand as well as growth demand. And as a result of the efficiencies that they have been able to achieve in the production process, they have been able to lower working capital and improve their cost base, which has led to accelerating free-cash-flow growth, which has led to them growing the dividend. They have doubled the dividend over the last four years and they have also shrunk their share count by 20% as a result of that free cash flow growth.

We are also watching economic growth and a more recent concern has been trade wars and whether this trend of globalisation that we have seen that has been driving revenue growth and dividend growth is impacted by some of these recent changes.