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Essentials: the asian dividend income strategy in three minutes
We connect our clients with insights and knowledge that empower them to make better investment and business decisions. Watch now. The strategy is deed to capture the strong income and dividend growth potential of Asian equities. We invest all across Asia Pacific, so that includes Australia, New Zealand and by sector and country there are no restrictions so we do invest across pretty much everything.
So the investment approach is very much bottom-up and what we do is to focus on a very rigorous valuation process; so we like to look at absolute valuation and focus on what the true value of each company that we invest in is, rather than the other way round which is more of a top-down and you'd be looking at relative valuation, that's something we tend not to do.
We are a value and income strategy so we believe that companies should have good valuation upside but also show sustainable dividend yield. So these companies project good levels of free cash flow for years ahead and they have a potential to increase dividends. So broadly two types of stocks that we own; we either have high yield, good, sustainable dividend, or we invest in companies that have a bit more underlying growth. So we've talked about the two types of stocks that we have in the portfolio, so that's the starting point; valuation is hugely important, so it's a bottom-up process, we look at absolute valuation.
But I would also say that these companies that we're investing in are indeed quality companies and the the way we define that, and of course it can be defined in many different ways, but I would say there are three key things; the first is operational quality.
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What that means is that these companies year after year have produced cash returns, so if you look at the kind of cash investment they make and the cash return from that investment, then these are well above the cost of capital. The second point is management quality; so we think that strategically these companies have done historically a very good job.
So they know when to invest in their industry, they know when to sell assets, and they know what impact that has on their returns.
So management again free from scandal and so on, have actually a good reputation for what they do. And the third thing is financial leverage; so if these companies for that industry have low leverage then that's something that appeals to us. If they are heavily indebted there's less potential for them to do that. So these three things together help us understand what is truly a quality company.
So there are a of income strategies across Asia, we know that, but I think the way that we run the fund is quite unique and I've touched upon dividend growth but I would say that that combination of focusing on high yield and dividend growth gives us a of things.
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The first thing is that it means we are less sensitive to interest rate movements; what we haven't done is just taken the top 50 high yielding stocks in Asia and put them in the portfolio, we've taken the top yielding companies in our view, in terms of quality, in terms of operational performance and valuation, and taken the top growth stories that we think fulfil that criteria in terms of valuation and potential dividend growth. So having that combination means that we are more defensive in periods of volatility, but also if Henderson asian dating free look at the kind of growth we can see in Asia today, and after all it's the fastest-growing region globally, then there are still countries, for example India, Indonesia, Philippines, that represent some of the most interesting macro stories in the world and we think that we can capture that upside over the long term.
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Henderson Management SA may decide to terminate the marketing arrangements of this Collective Investment Scheme in accordance with the appropriate regulation. Specific risks Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result. Emerging markets expose the Fund to higher volatility and greater risk of loss than developed markets; they are susceptible to adverse political and economic events, and may be less well regulated with less robust custody and settlement procedures.
If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified. This Fund may have a particularly concentrated portfolio relative to its investment universe or other funds in its sector.
An adverse event impacting even a small of holdings could create ificant volatility or losses for the Fund. The Fund may use derivatives with the aim of reducing risk or managing the portfolio more efficiently. However this introduces other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
If the Fund holds assets in currencies other than the base currency of the Fund or you invest in a share class of a different currency to the Fund unless 'hedged'the value of your investment may be impacted by changes in exchange rates. Securities within the Fund could become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
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Some or all of the Annual Management Charge and other costs of the Fund may be taken from capital, which may erode capital or reduce potential for capital growth. The Fund could lose money if a counterparty with which the Fund trades becomes unwilling or unable to meet its obligations, or as a result of failure or delay in operational processes or the failure of a third party provider. Related Insights. April Investment Viewpoints Coronavirus Dividends.
