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 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 provide diversification to any portfolio. During the recovery they have demonstrated an ability to decouple from the growth stocks which have broadly driven markets, whenever those growth stocks have come under pressure.

We have seen in 2021 that periods of higher inflationary and interest-rate fears favour income stocks as the valuation of growth stocks come under pressure

$12+ billion in

100+ clients worldwide

100+ clients worldwide

100+ clients worldwide

100+ clients worldwide

Dividend prospects to remain bright in 2022

The dividend recovery in 2021 was fuelled by a strong above-trend cyclical earnings recovery; in 2022, we would expect earnings and dividend growth to remain healthy but revert to more normal historic levels.

Dividend sustainability has improved through the crisis

The continuing dividend recovery is further supported by the fact that many companies have taken a cautious stance throughout the pandemic, reducing payout ratios by distributing a lower percentage of their earnings to shareholders; dividend growth has therefore lagged the earnings recovery.  This provides an extra buffer for any potential future economic slowdown, and means that the probability of companies having to cut their dividends has decreased.

Shift in the macro environment more favourable for income stocks

As we move to a new environment, the lower-valued income stocks are likely to be less vulnerable to inflation, not least because of the close correlation between inflation and rising dividend payments.

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

Infrastructure income – key stats and drivers

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

Infrastructure,Natural Gas,Renewables

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
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