Best In Class  

Best in class: TB Evenlode Global Income

Best in class: TB Evenlode Global Income

While many uncertainties remain today, there has been good news for investors in recent weeks, with companies around the world announcing record dividends as they recover from Covid-19.

Rising profits and strong balance sheets lifted payouts 22 per cent to an all-time high of $403.5bn (£297.6bn) in the third quarter, according to the latest Janus Henderson Global Dividend Index. An impressive 90 per cent of companies raised dividends – or at least held them steady – during the period, while large special payouts boosted the headline total.

“With balance sheets bolstered last year by new equity and debt issuance, and profits on the mend, a lot of the cash generated by companies is finding its way to shareholders in the form of dividends,” it concluded. 

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According to Janus Henderson, the tremendous performance achieved during the third quarter will make 2021 a great year for payouts to investors. It predicts headline global dividends are expected to jump 15.6 per cent this year to a bumper total of $1.46tn, which would beat the pre-pandemic record set in the 12 months to March 2020.

“This means global dividends will fully recover from their March 2021 mid-pandemic low within just nine months, restoring their long-term growth rate back to the 5 per cent to 6 per cent trend,” it concluded.

The even better news for investors is that, when it comes to global equity income, there is a plethora of choice, with more than 50 funds in the sector. 

This week’s best in class is one of our favourites in this space and a fund we have backed since its launch in November 2017.

TB Evenlode Global Income fund was launched to emulate the success of the TB Evenlode Income fund, while benefiting from a wider global remit. And successful it has been. Since launch it has returned 62.6 per cent vs a sector average of 38.5 per cent placing it among the top five.

And importantly it has been consistent throughout, posting first or second quartile performance in each calendar year. 

Managers Ben Peters and Chris Elliott have a clear investment philosophy and a process, and the fund has four key objectives: grow the dividend on a consistent basis; compound returns at a high annual rate; outperform major global market indices over the long-term; and generate returns with lower volatility and downside risk.

The portfolio is almost entirely constructed on a bottom-up basis and does not seek to predict short term moves in the economic cycle. The managers take a long-term approach with an average holding expected to be around five years and they aim to reduce volatility and downside risk by having a bias towards businesses that generate cash flow throughout the economic cycle.

These companies will typically have three characteristics: asset-light business models; high barriers to entry which can not be easily disrupted; and their customers’ decision to buy their product or service should not be determined completely by price.

Their strict criteria leads to an investable universe of around only 85 global companies before valuation is even considered. For these companies they build a long-term financial model (typically 10 years plus). They also undertake detailed fundamental analysis including analysing the competitive landscape and meeting company management. Almost all research is done in-house.