Dividend funds have long been a stalwart for investors seeking reliable income. Traditionally, these funds focus on stocks that offer high and dependable dividends, often from companies with strong cash flow, solid market positions, and healthy balance sheets.
Defensive sectors such as consumer staples, utilities, and healthcare frequently populate these portfolios, alongside more cyclical industries like oil and banking. While the core principles of dividend investing remain intact, the landscape has evolved, reflecting broader changes in the investment universe.
A broadened horizon
Over the years, the scope of dividend funds has expanded beyond the traditional high-yield sectors. Historically centered on energy, banks, and utilities, dividend strategies now increasingly include companies with lower initial yields but significant potential for dividend growth. This shift has brought more quality growth companies into the fold, marking a departure from the value-investing domain.
The Morningstar Style Box illustrates this transition, showing many global dividend funds now straddling the mixed category rather than the pure value column. Furthermore, ESG considerations have nudged some funds towards a growth bias, as sectors like tobacco, energy, and mining often fall outside their investment criteria.
Dividend initiations and surprises
Dividend initiations have notably influenced the dividend investing landscape. This year saw several high-profile companies, long absent from the dividend-paying arena, announcing their first payouts. Meta’s decision in February to start paying dividends was a significant surprise, boosting its stock price.
Despite a modest yield of around 0.5%, it aligns closely with the yields from tech giants like Microsoft and Apple, both fixtures in dividend portfolios. Alphabet and Salesforce also commenced dividend payments in early 2024, highlighting the dynamic nature of the dividend investment universe. Navigating this evolving landscape requires a disciplined yet adaptable approach.
Spotlight on JPM Global Dividend Fund
In this edition of Morningstar Fund Radar, we turn our focus to a standout strategy within the Morningstar Global Dividend Equity category. The JPM Global Dividend fund, currently under review for a qualitative rating by Morningstar’s analysts, has earned a spot on the Morningstar Prospect List. It boasts Above Average pillar scores for both People and Process, leading to a Silver Morningstar Medalist Rating for its C (Acc) EUR fund class.
Managed by a seasoned team, the strategy is spearheaded by veteran Helge Skibeli, who has been at the helm since March 2018. Skibeli, with 33 years at JP Morgan, brings a wealth of experience, having served as global head of equity research for developed markets and later as CIO. He is joined by Sam Whiterow, a JP Morgan stalwart since 2008, and Michael Rossi, who came on board in 2023. Whiterow and Rossi devote their efforts exclusively to the dividend strategy, leveraging JP Morgan’s extensive research resources, which cover approximately 1,700 companies.
Proven, robust strategy
The JPM Global Dividend fund’s strategy is grounded in time-tested principles that have proven successful across JP Morgan’s other offerings, with specific adjustments for the dividend mandate. The process is robust, structured, and repeatable, inspiring confidence through its unified bottom-up approach and fundamental analysis.
The portfolio blends dividend compounders with stocks offering high dividend growth rates, balancing quality with yield. Typically, the managers select 40-90 stocks, prioritizing quality companies while maintaining the flexibility to include innovative names like Meta Platforms, ASML, and Novo Nordisk alongside traditional dividend stalwarts.
Jeffrey Schumacher is director manager research at Morningstar Benelux. Morningstar analyses and evaluates investment funds based on quantitative and qualitative research. Morningstar is one of Investment Officer’s knowledge partners and takes an analytical look at a specific category of investment funds every Friday.
As Investment Officer Knowledge Partner, Morningstar specialists each Friday shed their lights on a specific category of investment funds. The series replaces the ‘Top 5’ funds overview, which generally addressed funds only available to investors in the Netherlands and/or Belgium. Funds discussed in the Morningstar Fund Radar are available in all countries where IO publishes, including Luxembourg.