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Why income stocks are attractive now

 

There are several reasons why we believe that income stocks could be an attractive option for investors in 2023:

1


Income prospects look attractive versus other income alternatives. Dividends may provide better inflation protection, and they are often more sustainable owing to many companies lowering payout ratios.


2


The potential for slower growth and lower capital returns from equity markets could make the income component of overall returns more significant.


3


Income stocks can provide diversification to any portfolio. Amid the global recovery from the pandemic, they have demonstrated an ability to decouple from growth stocks, tended to when the latter have come under pressure.

 

 

Value-orientated companies paying good dividend yields act differently to the rest of the market in a more inflationary environment

 

 

 

Dividend Sustainability

Newton believes dividends look more sustainable today than in previous market downturns. This is because during the pandemic companies reduced payout ratios. Distributing a lower percentage of earnings to shareholders means dividend coverage looks high, creating a buffer.

Shift in the macro environment more favourable for income stocks

Dividends matter more in markets with higher inflation, volatility and lower returns. Income stocks have traditionally performed better relative to the broader equity market during periods of higher inflation, says Ilga Haubelt, equity income team leader at Newton.

Compounding of dividends is the dominant source of long-term returns



Impact of dividends, United States, 1900-201911

 

 

 

 

For illustrative purposes only.
 

Note: 1 Bespoke US stock index, Prof Robert Shiller, Yale University, August 2020
Source: Prof Robert Shiller, Yale University, August 2020.

 

Newton's Income Solutions

 

Newton offers a range of income solutions to meet investors’ unique mix of yield / risk appetite.

The value of investments can fall. Investors may not get back the amount invested. Income from investments may vary and is not guaranteed.

Past performance is not a guide to future performance.

 

 

Source: evestment. 10 year data as aof 31 March 2023. Performance calculated as a total return gross of fees in USD. Fees and charges apply and can have a material impact on the performance of your investment.

 

WHY NEWTON INVESTMENT MANAGEMENT
 

Brought to you by Newton Investment Management

A global multi-specialist investment manager with a full spectrum of research-driven solutions.
 

Why Newton for Income Solutions

 

 

 

Hello

Solution focus
Newton's suite of income strategies seek to achieve income distributions and long-term capital growth. The philosophy behind the solutions in that the compounding of dividends is the dominant source of long-term real returns.
Scale
£20.0 bn in income strategies across: Global, US, UK, Asian, Multi-Asset, Emerging and Infrastructure.*
Expertise recognised
Investing in income strategies for over 19 years, evidence of strong dividend growth and a strong track record across all income strategies.
Process
  • Strict buy & sell discipline
  • Focus on dividend sustainability
  • Consideration of themes, fundamentals and ESG
  • Valuation margin of safety
Experience
13 portfolio managers with average 22 years' investment experience and 16 years at Newton supported by a global research team with an average 14 years' investment experience and 8 years at firm.
Scale
Expertise recognised
Process
Experience
Solution focus

Hello

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Solution focus

Newton's suite of income strategies seek to achieve income distributions and long-term capital growth. The philosophy behind the solutions in that the compounding of dividends is the dominant source of long-term real returns.

*Source: Newton. 31 March 2023

 

Team
 


NEWTON EQUITY INCOME TEAM

13
Portfolio
managers1
22
Years' investment
experience2
16
Years
at firm2

MANAGING 18% OF NEWTON AUM

 

 

1 Excludes UK Equity Income portfolio managers,

2Years’ investment experience and tenure at firm are team average numbers as at 31 March 2023 with years at firm relating to tenure at Newton and / or Mellon Investment Corporation. Source: Newton group of companies, 31 March 2023

 

 

Newton's Income Fund Range

The value of investments can fall. Investors may not get back the amount invested.

 

 

 

BNY Mellon Global Equity Income Fund

Fund Manager: Jon Bell

BNY Mellon Asian Income Fund

Fund Manager: Zoe Kan

BNY Mellon Global Infrastructure Income

Fund Manager: James Lydotes

BNY Mellon US Equity Income Fund

Fund Manager: John Bailer

Resources

 

 

 

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Historical track record %


Past performance is not a guide to future performance

 

*Simulated performance results have certain inherent limitations.  Simulated results do not represent actual trading/returns and are not a reliable indicator of future performance. Fees and charges apply and can have a material effect on the performance of your investment.

 

These synthetic returns were derived by synthetically removing the impact of hedging instruments from an actual Global Infrastructure Dividend Focus Equity mandate hedged to US Dollars. This unhedged performance stream includes the performance of client cash and investments managed in the Global Infrastructure Dividend Focus Equity strategy to present the performance results of what an unhedged mandate could have achieved over this time period.

  YTD 2023 2022 2021 2020 2019 2018 2017
Newton Asian Equity Income strategy 0.72 0.84 6.95 5.95 14.81 1.27 12.89
FTSE Asia Pacific ex-Japan TR -0.80 -5.88 -0.10 19.42 14.48 -8.51 23.37
Newton Global Equity Income strategy 2.10 8.91 -15.91 3.01 22.10 0.71 8.93
FTSE World 4.81 7.16 22.07 12.74 22.81 -3.09 13.34
Newton Global Infrastructure Dividend Focus Equity strategy 4.94 -7.39 16.29 -12.56 21.22 -6.03 17.48
S&P Global Infrastructure 3.94 -0.17 11.87 -5.76 26.99 -9.50 20.13
Newton Multi-Asset Income Strategy 2.59 -0.58 12.00 4.20 16.34 -5.12 13.08
Newton Income Stock Strategy -0.32 4.62 31.02 -1.83 29.30 -7.94 16.11
S&P 500 7.50 -18.11 28.71 18.40 31.49 -4.38 21.83
Newton UK Income Strategy 3.86 9.69 17.62 -8.57 21.15 -6.41 11.68
FTSE All-Share 3.08 0.34 18.32 -9.82 19.17 -9.47 13.10

 

 

 

Source: Newton, eVestment. Data as at 31 March 2023. Newton Global Equity Income strategy, Newton Asian Equity Income strategy, Newton UK Equity Income strategy and Newton Multi-Asset Income strategy performance calculated as a total return, income reinvested, gross of fees in GBP. Newton Global Infrastructure Dividend Focus Equity strategy and Newton Income Stock performance calculated as a total return, income reinvested, gross of fees in USD. Fees and charges apply and can have a material effect on the performance of your investment.

 

 

Contact us

 

 

 

 

Past performance is not a guide to future performance. The value of investments can fall. Investors may not get back the amount invested. Income from investments may vary and is not guaranteed. 
 

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