Fund of the week: A solid fund for income-seekers
Investing in well-run firms that are able to deliver long-term growth is the secret to this fund's success.
With Ben Bernanke, chairman of the US Federal Reserve, on record as saying that he won't raise interest rates until 2015, the current low savings rate environment is "here to stay", says Mark Dampier on Fundweb.co.uk. By contrast, yields from shares can look increasingly attractive.
Enter M&G's Global Dividend Fund, run by Stuart Rhodes. It aims to generate an above-average dividend yield by targeting global firms with a progressive dividend policy. A high dividend yield can signal a very low share price and hence a firm in trouble, so Rhodes stresses that he does not "chase high dividend yield alone".
Instead, he looks for well-run firms that can deliver long-term growth. So far his approach is paying off launched in 2008, the fund has delivered a return of 12.4% over one year and 30.2% over three years. What's more, it has almost doubled in size since 2011 from £1.7bn to £3.6bn. That, says Ruli Viljoen, head of fund research at Morningstar, is "testament to the ever-increasing popularity of... investors' desire to diversify... and go global".
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Rhodes keeps up to 60% of his portfolio invested in "quality companies", such as Sanofi and McDonald's, 20%-30% in cyclicals and 10%-20% in fast-growing firms, says Dampier. Just over 40% of the fund, which charges an annual fee of 1.5%, is invested in north America, with 26% in Europe and 14% in Britain.
Recent purchases include iron-ore producer Vale. Rhodes also favours financials and consumer staples, but is more bearish on utility and telecoms companies. With 5% estimated dividend growth for 2012/2013, this remains a solid fund for income-seekers.
Contact: 0800-389 8600.
M&G Global Dividend Fund top ten holdings
| Novartis AG | 3.7% |
| Johnson & Johnson | 3.4% |
| Chubb Corp | 3.3% |
| Prosafe SE | 3.1% |
| Prudential | 3.0% |
| Compass Group | 3.0% |
| Sanofi | 2.9% |
| Mattel Inc | 2.8% |
| Methanex Corp | 2.8% |
| DSM NV | 2.8% |
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