I mentioned in my post earlier this week about the possible advantages of focussing on stocks which have shown a consistent track record of increasing their dividends. S&P also provide an index for this in the UK and other regions around the world. The UK version is also offered as an ETF under the ticker UKDV which has been available since 28th February 2012.
You can get a copy of a recent fact sheet by clicking the highlighted ticker above or see it on line if that is of interest to you? If you want to get a spreadsheet with a list of the 30 holdings making up the fund you can download that here because I like to be helpful.
One interesting things is that I see Tesco (whoops) is in the top ten with a 4% weight - guess after their dividend cut it will drop out on the next index re-balance. I also note that Glaxo is also in the top ten and as I mentioned recently I have some concerns about the sustainability of their dividend distributions in the longer term, so you probably need to do your own research on stocks in this list and make sure you are comfortable with them if you were thinking of investing, this is why I prefer to do it myself.
However, I think the concept behind this index / ETF overall is a good one and if you wanted to follow it blindly then this offers a relatively cheap 0.3% (total expense ratio - TER) way of doing it with a current yield of around 4%. It looks like it has outperformed the FTSE by around 12% in capital terms since inception and obviously a bit more in total return terms given the extra yield. However as you'll see in the chart below is has underperformed over the last year after a poor run since June this year, probably primarily on the back of weakness in Glaxo & Tesco more recently.
Russia has been in the news a bit recently with Putin's adventures in the Crimea.
The Rouble has been in free fall (now about 10% below the ten year average versus Sterling for example) and the Russian Index has tanked as troops entered Crimea and on fears of sanctions by the West and oh yes some people think there is a bit of state interference and corruption over there. So you would have to be a Superhero with balls of steel to buy Russian equities at this juncture. However, the research document below suggests that the contrarian idea of buying the cheapest international markets based on CAPE (10 year PE) can work.
With Russia being one of the worlds cheapest markets on a P/E of around 5x and trading on a CAPE of around 7 times I believe, then this could be one to buy for the brave as it is certainly out of favour. Who knows perhaps successful diplomatic efforts might avoid another cold war? A good way to play it may be an Investment Trust JPM Russian Securities (JRS) which stand on a discount of around 7% (surprisingly not that wide compared to its history) and last year yielded around 3.6% on its 15.3 pence dividend declared last year and the current 430 pence price. However, they tend to focus on growth so the level of payout may go down as the board have indicated that earnings are likely to be lower this year, although they have moved to taking expenses from capital going forward which should help.
The Russian Index apparently yields around 4% versus 2.8% for the MSCI EM Index and as discussed above the CAPE PE is one of the lowest apart from - wait for it - Greece. However, if you prefer an index approach as opposed to an investment trust you could consider the iShares MSCI Russia ADR/GDR UCITS ETF (CSRU) - although it has no yield.
So that's probably enough for now on this crazy idea which I'm not enough of a Superhero to implement. Indeed as Winterfloods pointed out in a recent note on JRS: "Although the causes are different the Russian equity market has seen crises before. In the Russian financial crisis of 1997/8 the MSCI Russia fell 92% from peak to trough, in Sterling terms; and in the global financial crisis of 2008/9 it fell by 73% peak to trough. In the five years following the respective nadirs the index increased by 715% and 118% respectively. Over the five years since the nadir in 2009, the fund’s NAV increased by 203%. We remain in the midst of the current crisis and so far the market fall has been modest compared with the previous two crises. It seems that there is some way to go before any resolution to the crisis in Ukraine is reached and the Russian market is therefore likely to remain volatile." I love their English understatement at the end too - Pa-ka (that's Russian for Bye apparently).
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Further to my post about market timing yesterday which highlighted the fact that FTSE has only risen by about 2% since the year 2000, although it has nearly doubled from the lows in 2009. Here is a piece about how dividends have fared in the last five years and some sources of dividend data.
Global Dividend Trends
I saw a write up last week about a new publication by Henderson Global Investors about Global Dividends, their breakdown by region and growth rates. You can download a copy here if it is of interest. There's also a short introductory video from Alex Crooke who is the manager of a good, cheap (expense ratio), global equity fund called Bankers (BNKR) which yields 2.4%. It has however been re-rated in the last year or so and now stands on a premium to NAV so not such good value now in that sense.
Highlights from this report are that Asia and Emerging markets have been grown their dividends by 79% and 107% respectively since 2009 and now represent around 25% of overall global dividends. The US, UK and Japan have also been recovering nicely with rises of 49%, 39% and 29%, whereas Europe Ex UK has been quite poor with dividend growth of just 9% since 2009. The global average rise in dividends was 39% over this period. While that represents 6.8% growth in nominal terms per annum that compare with 2% per annum for workers earnings in the UK over the same time frame according to ONS as reported by the BBC.
Some Examples of How I Invest for Yield Globally
As I do not have the resources or information sources I do not generally tend to buy international shares on an individual basis, although I have had some US stocks over the years and just got some Verizon from Vodafone. The other reason is the tax complications it can bring and the fact that the UK offers a good selection of international businesses and returns from international equities have not been that different to those from UK equities. See the Global Year Books on my reading list (tab at the top of this blog on the site) or in the post about Behavioural Finance last week.
Thus for international exposure I tend to use Investment Trusts and ETF's. On Europe I have written in the past about getting a tasty yield from European Small Caps via European Assets Trust (EAT), it has grown its dividend as they are linked to the NAV which has been rising strongly in recent years, but this means their dividends can go down as well as up. I also currently invest in a JPM European Income Fund (JETI) which has a 3.7% yield and invests in larger / mid cap stocks and has just announced an increased second interim taking the dividend up by 11.8% for the year to 31/3/2014.
In the Far East I have also tended to use investment trusts such as Henderson Far Eastern Income and Schroder Oriental Income which yield 5.7% and 4.5% respectively and unusually the latter currently trades on a small discount. The Henderson Fund Yields more as it uses an option writing strategy to enhance the income, although it has lagged it competitors in capital terms. I'm not sure if this is because of the options or down to worse stock / country selection on their part. There is also an Aberdeen Asian Income Fund which yields 4.3% and has performed in between the other two over five years. This has consistently been on a premium so I have never go involved. I have also used an Exchange Traded Fund (ETF) in this region the I-Shares Asia Pacific Dividend Fund (IAPD) which yields 5.36%. This aims to track the performance of the Dow Jones Asia/Pacific Select Dividend 30™ Index as closely as possible. The Dow Jones Asia/Pacific Select Dividend 30™ Index measures the performance of 30 leading stocks by dividend yield from eligible Asia/Pacific countries. The index is weighted according to dividend yield subject to screening and buffering criteria.
In Emerging Markets I am also using an ETF the I-Shares Emerging Markets Dividend Fund (SEDY) although it's been a bit disappointing so far, in line with emerging markets, but it does yield 4.75%. The Fund aims to track the performance of the Dow Jones Emerging Markets Select Dividend Index. This measures the performance of 100 leading stocks by dividend yield from emerging market companies. The index is weighted according to dividend yield subject to screening and buffering criteria. See the I Shares site for more details of these and other ETF's. There is also a JPM Emerging Markets Income Fund (JEMI) which has been consistently on a premium so I have not been able to bring myself to buy it and it has done well since launch but also been fairly flat in capital terms more recently, but does offer a 4.6% yield. In any event I have a long standing holding in their regular Emerging markets fund (JMG) which stands on a discount of around 11% currently but only yields 0.7%.
Otherwise I have invested in some global equity funds such as Bankers (BNKR) which I mentioned earlier and Scottish Mortgage (SMT) but I sold both of these when they moved to premiums. I still retain some Alliance Trust (ATST) as it still trades on a discount and offers a modest 2% yield or so and is reasonably cheap in terms of charges. I'm also hopeful that the changes they have made in recent years to the management of it might improve the performance. In addition I notice that US activist Elliott Associates recently announced a 10% stake so hopefully they may be pressured to be more proactive about the discount as they were a few years ago when another activist got involved.
Sources of Dividend Data
Since I focus on yield in my investing I like to know about dividends and their history, when they go XD and when they are paid etc. So I thought I would share with you some of the sites I use to access and keep track of this type of information.
One place is obviously Stockopedia (subscription required) which I use a lot and has a good level of detail about dividend history, growth rates and cover etc. on its Stock report pages. There is also a section here where you can click through to more detailed history and breakdown of the dividends by interim and final etc. I trialled Share scope once which is quite good for downloading all this sort of information, but it also requires a subscription and I found Stockopedia easier to use and more useful to me.
However if you want a free source of similar information then Digitallook is a site I often go to to get a quick handle on the dividends and their payment dates. Aside from that a useful resource for identifying upcoming XD's and payments is:
http://www.upcomingdividends.co.uk/ whose name pretty much explains what it does. It also offers plenty of screening and sorting options by index, stock, yield, month, XD and pay date etc. and is quite easy to use.
Finally, you'll be pleased to hear, I would also use a site called DividendInvestor. I wouldn't describe it as the most user friendly site in the world, but if you sign up for free and can get your head around it you can do some screening of a sort to look for high yields and xd dates etc. However, the thing I use it for most is their Scorecard and e-mail alert system. This allows you to select the stocks you are interested in and they then e-mail when they have announced a dividend. I find this useful as a back up just in case I have missed an announcement. There you go and once you have found them don't forget to compound those dividends if you can.