Rising dividends will see investors bail from bonds: Henderson Global manager

Income-seeking investors should take solace in a trend toward rising dividend payouts in 2012, according to Alex Crooke, manager of the $1.2 billion Henderson Global Equity Income Fund Ticker:(HFQAX). “I think dividend growth this year will be in the order of 10%,” he said. The prediction is supported in part by a global dividend payout ratio equal to 30% of earnings, which compares with 50% historically. Mr. Crooke manages the fund from the London headquarters of Henderson Global Investors, which manages $119 billion in assets. “Over the past few years, a lot of shares fell to discounts, but on average, companies are growing dividends again,” he said. Despite meager yields from the fixed-income space, Mr. Crooke believes there has still been more talk than action in terms of moving from bonds to dividend-paying stocks. “I still expect to see more flows coming from bonds into equities,” he said. “The average investor has been fearful and hiding in bonds, but they know they can't live off yields of 1%.” The fund, which averages around 60 positions, generated a 6.5% dividend yield last year. The fund's total return last year was a decline of 1.5%, which compares with a 12.4% decline by the MSCI EAFE Index and a 7.9% decline by the world stock category as tracked by Morningstar Inc. The portfolio is most heavily weighted to the United Kingdom at 33%, followed by a 22% allocation to the United States. The sovereign-debt issues sweeping across the eurozone countries has led Mr. Crooke to reduce his exposure there to 12%, behind Asia at 15%. There also are some small allocations to stocks in Canada and Brazil. “We're light on the European region today because of the increased risk that the region fractures,” he said. “The probability is that it doesn't fracture, but the risk is rising and that has had an impact on every stock in the region.” 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.