Income stocks could be an attractive option for investors in 2022, discover why.

Discover Income Solutions at Newton Investment Management

Why income stocks are attractive now

There are several reasons why we believe that income stocks could be an attractive option for investors in 2022:

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

Income stocks remain cheap compared to the overall market and growth stocks, despite the strong comeback in dividends that we have seen in 2021. Elevated valuations and more nomalised earnings expectations should move the market focus back to dividends: a higher percentage of total return could come from dividends.

3

Income stocks can provide diversification to any portfolio. Amid the global recovery from the pandemic, they have demonstrated an ability to decouple from the growth stocks, whenever 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

$12+ billion in

100+ clients worldwide

100+ clients worldwide

100+ clients worldwide

100+ clients worldwide

Dividend prospects to remain bright in 2022

Newton’s equity income team expects earnings and dividend growth to remain relatively healthy in companies with safe balance sheets and low payout ratios – those with a track record of successfully adapting to a changing world. These are often well-known brand names that have successfully transitioned over time, including through world wars, inflation and deflation.

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, 1900-20191

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.

Source: evestment. 10 year data as aof 30 September 2022. 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

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

Why Newton for Income Solutions

    Scale
    Expertise recognised
    Process
    Experience
    Solution
    focus
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*Source: Newton. 30 September 2022

Solution focus

Newton's suite of sustainable strategies seek both positive investment returns and positive societal outcomes.

Team

NEWTON EQUITY INCOME TEAM

0
Portfolio
managers1
0
Years' investment
experience2
0
Years
at firm2

MANAGING 18% OF NEWTON AUM

1 Excludes UK Equity Income portfolio managers,
2 Years’ investment experience and tenure at firm are team average numbers as at 30 September 2022 with years at firm relating to tenure at Newton and / or Mellon Investment Corporation. Source: Newton group of companies, 23 September 2022

Newton's Income Fund Range

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

BNY Mellon Global 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 Multi-Asset Income Fund

Fund Manager: Paul Flood

BNY Mellon UK Income Fund

Fund Manager: David Cumming

BNY Mellon US Equity Income Fund

Fund Manager: John Bailer

Resources

Back to the future

After a knock-out 12 months for equity income, the higher inflation, higher interest-rate environment heralds a return of more ‘normal’ market conditions; a focus on fundamentals is back in vogue, explains Jon Bell, portfolio manager in Newton Investment Management’s global equity income team.

Equity Income,Fundamentals,Global Equity,Inflation,Interest Rates

Q3 Panel Watch: Global Income

In this quarter’s edition of Panel Watch, we explore how the Global Income asset class is performing in these challenging market conditions and why allocating to this asset class might offer a number of benefits.

Global Income,Jim Lydotes,Newton

Challenge and Opportunities in Global Equity Income Investing

Jim Lydotes, the deputy CIO of Equities and the head of the income team at Newton Investment management assesses the outlook for equity income investing globally.

Income,Newton
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Historical track record %

YTD 2022
2021
2020
2019
2018
2017
Newton Global Equity Income strategy
11.72
15.91
3.01
22.1
0.71
8.93
FTSE World
-2.3
22.07
12.74
22.79
-3.09
13.34
Newton Global Infrastructure Dividend Focus Equity strategy
1.74
16.29
-12.56
21.22
-6.03
17.48
S&P Global Infrastructure
7.33
11.05
-6.49
25.75
-10.37
19.07
Newton Asian Equity Income strategy
2.17
6.95
5.95
14.81
1.27
12.89
FTSE Asia Pacific ex-Japan TR
-4.64
-0.1
19.42
14.48
-8.51
23.37
Newton Income Stock RP
8.04
30.85
-1.56
29.65
-7.84
16.33
S&P 500
-13.1
28.71
18.4
31.46
-7.84
16.33
Newton Multi-Asset Income Strategy
1.3
11.53
4.07
15.61
-6.11
12.12
MSCI AC World
-3.35
10.73
10.53
15.46
-1.98
8.65

Source: Newton 30 November 2022. 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 US Equity Income representative portfolio 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.

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. 945251