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 dividends, United States, 1900-2019

chart comulative value: 1900 = US$1

For illustrative purposes only.
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.

Income strategy diagram
Income strategy diagram

Source: evestment. 10 year data as of December 31 2021. 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

    Scale
    Expertise recognised
    Process
    Experience
    Solution
    focus
    Logo icon
    1circle-filled-01
*Source: Newton. 31 December 2021

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 31 January 2022, with years at firm relating to tenure at Newton and / or Mellon Investment Corporation. Source: Newton group of companies, 31 January 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: Ilga Haubelt

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

global-infrastructure-statistics-info

Infrastructure income – key stats and drivers

Discover some key factors behind the growth of infrastructure income investing.

Infrastructure,Natural Gas,Renewables
asian income info

Asian Income – key stats and drivers

Discover the key stats and drivers impacting the economies of the ASEAN region.

ASEAN,Dividends,Emerging Markets
Featured image for article Income investing for the times we are living in

Income investing for the times we are living in

Discover why we think a bias to value is important in time of high inflation.

Equity Income,Income Solutions,Value
Featured image for article Play it safe, buy cheaply?

Play it safe, buy cheaply?

Is now the time to consider your allocation to equity income. We think so.

Dividends,Equity,Income,Value stocks
Featured image for article Academic support for equity income

Academic support for equity income

Dividends are one of the most widely researched and debated topics in corporate finance. A recent report from Newton looks at the academic insights that support the case for dividends.

Dividends,Equity Income,yield
Article 5

Avoiding the crowd to find dividends in Asia

Why BNY Mellon Asian Equity Income manager Zoe Kan thinks investors are best shunning the region’s popular growth stocks as its macroeconomic environment takes a turn.

Asian equity,China,Growth
Featured image for article Is 2022 the year for income stocks

Is 2022 the year for income stocks?

After the pandemic-induced and broad-based dividend cuts and suspensions of 2020, we witnessed a strong global dividend comeback in 2021 as economies gradually opened again. Indeed, it was the fastest-ever dividend recovery on record to follow a recession.

Dividends,Equity,Income
Featured image for article Dividend recovery boon for income investing

Dividend recovery boon for income investing

Newton’s global income team expects inflation to remain elevated and a brighter outlook for dividends this year, which it believes will drive a rotation into income stocks.

Dividends,Income,Inflation
VIEW MORE ARTICLES

Historical track record %

2021
2020
2019
2018
2017
Newton Global Equity Income strategy
15.91
3.01
22.1
0.71
8.93
FTSE World
22.07
12.74
22.79
-3.09
13.34
Newton Global Infrastructure Dividend Focus Equity* strategy
16.29
-12.56
21.22
-6.03
17.48
S&P Global Infrastructure
11.05
-6.49
25.75
-10.37
19.07
Newton Asian Equity Income strategy
6.95
5.95
14.81
1.27
12.89
FTSE Asia Pacific ex-Japan TR
-0.1
19.42
14.48
-8.51
23.37
Newton US Equity Income strategy
17.63
-8.57
21.15
-6.41
11.68
FTSE All-Share
18.32
-9.82
19.17
-9.47
13.1
Newton US Equity Income RP
30.85
-1.56
29.65
-7.84
16.33
S&P 500
28.71
18.4
31.46
-7.84
16.33
Newton Multi-Asset Income Strategy
11.53
4.07
15.61
-6.11
12.12
MSCI AC World
10.73
10.53
15.46
-1.98
8.65
*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.

Source: Newton 31 December 2021. 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