Over the past few years, we have noticed a remarkable shift: the dividend yield of global dividend strategies has been in decline. Increasing exposure to mega-caps with steep valuations has shifted the category away from high dividend yields. On average, global dividend strategies have also increasingly resembled the MSCI World in terms of style tilt, thereby reducing the diversification benefits of investing in dividend equities. By sticking to our investment philosophy, our strategy increasingly stands out within the peer group, with a portfolio consisting of out-of-the-ordinary companies.
Following the crowd
Global Dividend strategies are a well-established group. There are 50 global dividend funds with at least €100 million assets under management each, managing a total of €75 billion*. Their mandate typically requires that these funds provide an income and aim for capital growth.
In recent years however, the median yield of these funds has taken a notable step down, as shown in the graph below. This drop was for a long time attributed to falling yields across financial markets. However, this argument no longer holds as rates have increased recent years. In fact, there has been a structural shift visible in the investment style of many dividend funds that explains their lower yields. We identified two primary factors that drive this trend.
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*Source: Van Lanschot Kempen, Morningstar Direct. As of end of June 2024.