Global equity income outlook: corporate profitability key to dividend growth

30/11/2016

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Alex Crooke, Head of Global Equity Income, believes that macro political and economic trends are likely to again influence global equity markets in 2017 and that corporate profitability will be the key to generating capital and dividend growth.  

What lessons have you learned from 2016?

What we have learned from 2016 is that investing in different markets has been driven by different characteristics. One overriding theme, however, has been a trend towards reflation, with investors expecting to see inflation coming through and growth picking up in certain areas. That has led to slight underperformance in some more defensive sectors, such as telecoms. Other areas of the market like financials, where a number of the Global Equity Income Team’s strategies have been heavily exposed to, have performed much better. At a county and regional level, local politics have influenced markets and driven stock selection and performance, most notably Brexit and the US Presidential election.

What are the key themes likely to shape the market in 2017?

Looking forward into next year we expect the continuation of some current trends. In particular, we will again be watching US policy and investment plans with interest and how these are going to be delivered. Within Europe there will be key Brexit negotiations next year and we will need to judge the likely effects this will have on economies and corporate profitability. Overriding that, in 2016 we’ve had a very strong US dollar so it will be interesting to see how that plays out for international companies. The price of oil will again be very important. It has been recovering gently in 2016; so it will be interesting to see whether supply contracts and whether we see a rise in the price - both of which tend to dent global growth. Undoubtedly, there will be a lot of factors at play in 2017 and trying to judge how they all interact will be the key to generating performance.

What should investors expect from the asset class in the coming year?

Overall, the outlook is not gloomy. Analysts are still forecasting growing earnings and if this happens then we should see dividends rise globally. Our long-term study into dividend trends, based around the Henderson Global Dividend Index (HGDI), is forecasting around 1% growth in global dividends next year in US dollar terms. If corporate profitability improves then we hope to see an upgrade to those forecasts.

Generally, we see profitability improving as a result of growth in the supply of money and from bank lending increasing. While valuations of some companies are looking quite high, particularly in the US, we see better value in Europe, Asia and some parts of the Emerging Markets.

In summary, we think 2017 could be a good year for investing if the infrastructure and spending plans from various economies come through. If corporate profitability improves then we think the price of shares could improve over the year.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

The information in this article does not qualify as an investment recommendation.


Important information

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Henderson Global Equity Income Fund

Please read all scheme documents before investing. Before entering into an investment agreement in respect of an investment referred to in this document, you should consult your own professional and/or investment adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

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Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing. Copies of the Fund’s prospectus and key investor information document are available in English, French, German, and Italian. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from Janus Henderson Investors registered office: 201 Bishopsgate, London EC2M 3AE.

Issued by Janus Henderson Investors. Janus Henderson Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), Henderson Investment Management Limited (reg. no. 1795354), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), Gartmore Investment Limited (reg. no. 1508030), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. Telephone calls may be recorded and monitored.

Copies of the Fund’s prospectus are available in English, French, Spanish German and Dutch. Key investor information documents are available in English, Danish, German, Finnish, French, Italian, Norwegian, Spanish, Swedish and Dutch. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from the local offices of Janus Henderson Investors: 201 Bishopsgate, London, EC2M 3AE for UK, Swedish and Scandinavian investors; Via Dante 14, 20121 Milan, Italy, for Italian investors and Roemer Visscherstraat 43-45, 1054 EW Amsterdam, the Netherlands. for Dutch investors; and the Fund’s: Austrian Paying Agent Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna; French Paying Agent BNP Paribas Securities Services, 3, rue d’Antin, F-75002 Paris; German Information Agent Marcard, Stein & Co, Ballindamm 36, 20095 Hamburg; Belgian Financial Service Provider CACEIS Belgium S.A., Avenue du Port 86 C b320, B-1000 Brussels; Spanish Representative Allfunds Bank S.A. Estafeta, 6 Complejo Plaza de la Fuente, La Moraleja, Alcobendas 28109 Madrid; Singapore Representative Henderson Global Investors (Singapore) Limited, 138 Market Street, #34-03/04 CapitaGreen, Singapore 048946; or Swiss Representative BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich who are also the Swiss Paying Agent.

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Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), Henderson Investment Management Limited (reg. no. 1795354), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), Gartmore Investment Limited (reg. no. 1508030), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. Telephone calls may be recorded and monitored.

Specific risks

  • Global portfolios include a small weighting to Emerging Markets, usually less than 10%, which tend to be less stable than more established markets and can be affected by local political and economic conditions, reliability of trading systems, buying and selling practices and financial reporting standards
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  • Some of the investments in this portfolio are in smaller companies shares. They may be more difficult to buy and sell and their share price may fluctuate more than that of larger companies

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