Fidelity’s Michael Clark follows dividend payers

Tuesday, Oct 18 2011 by
3

The recent fall in stock markets provides an opportunity for investors to invest in solid dividend payers willing to take a longer term view. Many companies able to demonstrate sustainable sales and earnings growth in a challenging economic environment are on very attractive dividend yields.

In comparison the banking sector is not yet broadly investable for equity income investors principally because many of the banks are not paying a dividend and are not about to start anytime soon.

In this latest PM Perspective, Michael Clark, manager of Fidelity’s Money Builder Dividend fund, believes the ability to pay and grow dividend payments is an excellent barometer of corporate health and an effective means of capturing long-term value from the stockmarket and outlines where he is finding opportunities.

Banking shares are not one of these sectors

“Since 2008, I have has a very negative view on banks. My exposure to the banking sector is largely confined to HSBC.  I was convinced enough of the valuation attractions to add to my investment in HSBC, when it fell below £5 a share.“

“I think it is too early to make serious investment in the broader European banking sector at the moment. Of course, many of the banks are not currently dividend payers, and this will remain the case for the next few years.“

“With continuing pressures on residential house prices, commercial property prices, and net interest margins from low interest rates, I feel that banks will struggle to return to a decent level of profitability for some time.“

Investment approach focused on dividends

My view is that “investing in stocks that pay dividends, and more pointedly, grow their dividends, is the best way of capturing value from stock markets over the long term.“

Academic analyses of long-term returns consistently point to the fact that investing in dividend-paying stocks and reinvesting the income is a very rewarding strategy thanks to the magic of compounding. With the benefit of time, investing in income shares begins to look like investing for growth.

For investors reinvesting dividends, an investment in equity income is best judged over a longer-time period, over which the power of compounding has time to work.

Unfortunately, investors have become very myopic in recent years and have great expectations for growth even over short time periods. Yet, there is much to commend in the opposite approach: invest in income-yielding shares and forget about the short-fluctuations…

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Disclaimer:  

Steven Dotsch - Managing editor - http://www.dividend-income-investor.com - Guide to Dividend Investing, at: http://www.dividend-income-investor.com/guide-to-dividend-investing/ - Dividend Value Profiles, at:   http://www.dividend-income-investor.com/british-american-tobacco/


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HSBC Holdings plc (HSBC) is the banking and financial services company. The Company manages its products and services through four businesses: Retail Banking and Wealth Management (RBWM), Commercial Banking (CMB), Global Banking and Markets (GB&M), and Global Private Banking (GPB). It operates across various geographical regions, which include Europe, Asia, Middle East and North Africa, North America and Latin America. RBWM business offers Retail Banking, Wealth Management, Asset Management and Insurance. CMB services include working capital, term loans, payment services and international trade facilitation, among other services, as well as expertise in mergers and acquisitions, and access to financial markets. GB&M supports government, corporate and institutional clients across the world. GPB's products and services include Investment Management, Private Wealth Solutions, and a range of Private Banking services. more »

LSE Price
603.7p
Change
1.1%
Mkt Cap (£m)
122,236
P/E (fwd)
10.1
Yield (fwd)
7.0

AstraZeneca PLC (AstraZeneca) is a biopharmaceutical company. The Company focuses on discovery and development of products, which are then manufactured, marketed and sold. The Company focuses on three main therapy areas: Oncology, Cardiovascular & Metabolic Disease (CVMD) and Respiratory, while selectively pursuing therapies in Autoimmunity, Infection and Neuroscience. In CVMD, it is expanding its portfolio into the cardiovascular-renal area with late-stage assets, such as ZS-9 and roxadustat, as well as investing to explore the benefits of its SGLT2 and GLP-1 franchises in chronic kidney disease (CKD) and heart failure (HF). The Company has approximately 40 projects in Phase I, including 29 new molecular entities (NMEs), and 11 oncology combination projects. It has approximately 40 projects in Phase II, including 25 NMEs; four significant additional indications for projects that have reached phase II, and seven oncology combination projects. more »

LSE Price
7281p
Change
0.3%
Mkt Cap (£m)
95,518
P/E (fwd)
22.1
Yield (fwd)
3.2

Imperial Brands PLC, formerly Imperial Tobacco Group PLC, is a fast-moving consumer goods company. The Company offers a range of cigarettes, fine cut and smokeless tobaccos, papers and cigars. The Company's segments include Growth Markets, USA, Returns Markets North, Returns Markets South and Logistics. The Growth Markets segment includes Iraq, Norway, Russia, Saudi Arabia and Taiwan, and also includes Premium Cigar and Fontem Ventures. The Returns Markets North segment includes Australia, Belgium, Germany, the Netherlands, Poland and the United Kingdom. The Returns Markets South segment includes France, Spain and its African markets, including Algeria, Ivory Coast and Morocco. Its businesses include Tobacco and Logistics. The Tobacco business comprises the manufacture, marketing and sale of tobacco and tobacco-related products. The Logistics business comprises the distribution of tobacco products for tobacco product manufacturers. more »

LSE Price
2111.5p
Change
1.1%
Mkt Cap (£m)
20,148
P/E (fwd)
7.4
Yield (fwd)
10.3



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1 Post on this Thread show/hide all

Fangorn 11th Nov '11 1 of 1

Interesting note from Evolution on HSBC

In a stark research note issued this morning, Evolution Securities has reiterated its sell recommendation for banking giant HSBC, saying simply, "HSBC isn't working!"

The broker acknowledged that "come rain or shine", HSBC will probably remain a much-loved stock among the London "sell-side": "Never mind the so-called safe haven arguments. There is absolutely no excuse for owning the shares at all," said analyst Ian Gordon.

While chief executive officer told analysts in a conference call that he hopes to hit the 'bottom end' of his 2013 targets - a 12% return on equity and a 52% cost efficiency ratio - Evolution said that is doesn't expected either to be achieved.

A 600p target price is kept.


So let's get this straight - You rate HSBC a "Sell", "there's apparently no excuse for owning shares in the company at all", YET

Your 600p target price is kept, and the stock currently is trading at a significant discount to your target price!!!!!!

A BUY surely to your TP, whereupon you rate it a sell or perhaps you are going to revise your target price downwards no?

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