We also look for businesses with quality characteristics which are undergoing a period of positive change, often driven by exceptional management.
These are companies which may have temporarily fallen out of favour but where we see real positive future value. In the late 2000s we avoided investing in Tesco as we did not like its capital allocation or feel the company was using its scale to benefit the consumer.
Fast forward a few years, under new management and following the Booker deal, Tesco is using scale to its advantage and has great potential to grow its dividend sustainably in the future.
In an environment of significant political and economic uncertainty, investors in UK equities would be wise to focus on the long-term sustainability of dividend growth.
We believe that capital light, cash-generative quality companies, that have an ability to compound returns and cashflows over the long term, with lower sensitivity to the economic cycle, remain well placed to achieve this.
Blake Hutchins is portfolio manager of the Investec UK Equity Income fund