Robin Geffen, fund manager, Liontrust
Investors shouldn’t blame all of their dividend income problems on this “very challenging year”, veteran fund manager Robin Geffen tells Morningstar. “The seeds of this whole issue of dividend cuts and cancellations” were sowed many years ago, as exposure to individual “dividend risk” became too extreme.
More and more funds were “clustered in a very small group of high-yielding stocks that were basically paying dividends they couldn’t afford”. This included the big FTSE 100 dividend stalwarts such as the banks (Barclays, NatWest, Lloyds, HSBC) and others such as Vodafone and BP that paid “unsustainably high dividends” and “weren’t reinvesting in their own future”, says Geffen. When they “hit the buffers”, payouts were slashed.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
The crisis shows that investors need to pay more attention to dividend cover, leverage and cash, and to focus on “dividends that can repeat and grow”. Geffen has nearly 25% of his fund in tech stocks, such as Apple, Mastercard, Microsoft and Visa, which are “remarkable companies… many of them have virtually no debt… and have incredibly high dividend cover”.
Of course, that high dividend cover implies that many could be paying out more than they are, and that should happen: “I believe that [firms] like Amazon and Alphabet will start paying dividends because they are generating so much cash.” But it’s equally important that “they’re continuing to invest in their own future… making that investment in order to carry on growing at these astonishing rates”.
-
Why now is the right time to invest in biotechThe biotech sector holds huge potential for investors, with strong growth and attractive valuations. Here's the best way to play it.
-
Zoopla: Busiest home buying May since 2021, but property asking prices slideBuyers return to the market after the end of higher stamp duty thresholds and post-Easter lulls, but average sales are £16,000 below asking price
-
Investment opportunities in the world of Coca-ColaThere is far more to Coca-Cola than just one giant firm. The companies that bottle and distribute the ubiquitous soft drink are promising investments in their own right.
-
Streaming services are the new magic money tree for investors – but for how long?Opinion Streaming services are in full bloom and laden with profits, but beware – winter is coming, warns Matthew Lynn
-
'Pension funds shouldn't be pushed into private equity sector'Opinion The private-equity party is over, so don't push pension funds into the sector, says Merryn Somerset Webb.
-
Greg Abel: Warren Buffett’s heir takes the throneGreg Abel is considered a safe pair of hands as he takes centre stage at Berkshire Hathaway. But he arrives after one of the hardest acts to follow in investment history, Warren Buffett. Can he thrive?
-
Who will be the next Warren Buffett?Opinion There won’t be another Warren Buffett. Times have changed, and the opportunities are no longer there, says Matthew Lynn.
-
Will Comstock crash – or soar?Opinion The upside for Comstock, a solar panel-recycling and biomass-refining group, dwarfs the downside, says Dominic Frisby.
-
'As AGMs go digital, firms must offer a new form of scrutiny for shareholders'Opinion Technology has rendered big AGM meet-ups obsolete, but the board still needs to be held to account, says Matthew Lynn
-
Unilever braces for inflation amid tariff uncertainty – what does it mean for investors?Consumer-goods giant Unilever has made steady progress simplifying its operations. Will tariffs now cause turbulence?
