Yield set to become key equities measure
Aberdeen Asset Management predicts the current investment environment will eventuate in yield becoming as important within equities as it is within the bond market.
Volatility across global share markets has made earnings difficult to predict, resulting in the price earnings ratio being a less relevant indication to astute investors than a company’s dividend policy.
Aberdeen managing director Hugh Young said a company’s dividend policy “better indicates a company’s true value and long-term performance”.
“A company can do one (or a combination) of four things with the cash generated by its operations: keep it (reduce gearing), spend it (on fixed assets), pass it to shareholders (as dividends), or reduce capital (through share buybacks),” said
Young said his confidence in dividend payouts as an investment indicator is backed by a study by Robert Arnott and Cliff Asness entitled, ‘Surprise! Higher dividends = higher earnings growth’.
This study of 130 years of data found that the higher the payout ratio, the higher the earnings growth in the subsequent 10 years, a finding that flew in the face of accepted wisdom, he said.
Recommended for you
The struggle to recruit specialist expertise in alternative asset classes means senior analyst salaries are surpassing $200,000 as fund managers compete for talent, observes Kaizen Recruitment.
TWC Investment Management, which launched in September, has unveiled a long-only equity fund targeting global wealth creator stocks.
As thematic ETFs gain popularity among advisers, research houses have told Money Management of their unique challenge to rate these niche products and assess their long-term viability.
Magellan Financial Group’s chief financial officer and chief operating officer Kirsten Morton is set to depart from the asset manager after more than a decade.
