Portfolio Manager Perspectives

Jeff Benjamin

Dividend-slicing trend nearly over, says Henderson's Job Curtis

Good time to load up on high-yielding equities in food, beverage and other ‘classic defensive' sectors

Feb 23, 2010 @ 3:11 pm

By Jeff Benjamin

Corporate-dividend payouts have fallen over the past few years, but the bottom is now in sight, according to Job Curtis, manager of the $570 million Henderson Global Equity Income Fund (HFQAX).

“I think we're through the worst of it,” he said. “Overall, any company that was going to cut dividends has done so by now.”

With that in mind, Mr. Curtis said that even an “anemic recovery” will provide a good environment for high-yielding equities. “We've been though a massive storm, and right now, you have to be quite focused on cash-generative industries,” he said.

The fund is managed out of the London headquarters of Henderson Investment Management Ltd., one of the United Kingdom's largest money management firms.

In particular, Mr. Curtis prefers pharmaceutical companies, despite the challenges that come with expiring patents and continuing efforts in the U.S. for health care reform.

Food, beverage and tobacco companies are also appealing from a dividend perspective, he said.

“These are classic defensive sectors,” he said. “No matter what's going on in the world, people do carry on with eating, drinking and smoking.”

As with all the companies and sectors he likes in the current environment, the emphasis is on growth coming largely from emerging markets.

By geographic region, the global portfolio of about 70 stocks has a 34% weighting in the U.K., followed by 27% in continental Europe, 17.5% in the Asia-Pacific region and 15% in the United States.

By sector, the fund is most heavily weighted in pharmaceuticals at 12.8%, followed by 12.2% in energy, 9.9% in capital goods and 9.1% in food, beverage and tobacco companies.

Across the portfolio, the average dividend yield is 4.5%, but through a dividend capture program, Mr. Curtis was able to bump that yield up to 7.5% last year.

The dividend capture strategy involves buying shares of companies a few months before dividends are scheduled to be distributed to investors and then selling the shares shortly after the distribution. The strategy works best outside the U.S., where it is more common for companies to distribute bigger dividends only once or twice a year, as opposed to quarterly.

While the dividend capture strategy does generate higher yields, it also boosts turnover, which can swing as high as 200% annually for the fund.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives..


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