He adds that for non-UK companies where there are supportive valuations and a focus on strong dividends and profitability, it is well worth putting the extra effort in to track them down.
“A focus on reasonably valued companies with resilient franchises and strong balance sheets has historically rewarded investors,” said Roberts.
“It is these types of companies that provide the potential to deliver a healthy level of income, real capital growth and lower levels of volatility and drawdown than the broader market.”
“Companies with a track record of paying dividends are often more predictable and resilient businesses. This type of company tends to provide good long-term returns with less volatility than the wider equity market.”
Here Roberts tips five global income-paying stocks that are available to UK investors across several platforms.
Medtronic
Medtronic is a $63bn US-based provider of healthcare equipment, services and technology. It is currently trading at a high price-to-earnings ratio of approximately 20.
“It is exposed to difficult industry trends in cardiac rhythm management and stents but its remaining divisions have delivered consistent growth of 10 per cent for the last five years, and we expect this growth to be sustained,” said Roberts
“It has demonstrated under a variety of economic scenarios – and company-specific scenarios – to have very resilient earnings. It has recently confirmed the purchase of Covidian which overall should prove positive and make a stronger, more profitable profile for Medtronic despite stretching the valuation.”
Seven IMA funds hold the stock in their top-10, including Investec American and BlackRock Global Funds US Basic Value.
Gas Natural Fenosa
This Spanish-listed utilities company has operations in Europe, South and Central America and North Africa, giving it broad exposure to global markets.
Roberts says he bought a new position in the company in November 2013.
“It is a well-diversified Spanish utility with high free cash-flow yield – more than 10 per cent at purchase, which is emerging from a period of regulatory uncertainty. It has locked in liquefied natural gas profits till 2015, is attractively valued and pays a solid dividend of over 4 per cent.”
Wolters Kluwer
Roberts also likes the cash-generating characteristics of this Netherlands-listed publisher. The firm recently reported a 23 per cent jump in profits.
“Cash-flow generation is very robust and has grown broadly in line with their dividend per share over the last 10 years, meaning that the dividend cover remains extremely healthy,” Roberts explained.
“In fact, the dividend on offer, 3.2 per cent, is approximately twice covered by free cash generation. Growth prospects are likely to improve due to the ongoing shift towards electronic products and services and should also benefit from a cyclical upswing.”
Thirteen IMA funds hold it in their top-10, including F&C European Growth & Income, Fidelity Global Dividend, Henderson European Growth, JOHCM Global Opportunities and Jupiter Income.
Vinci Construction
This French construction company is the world’s largest by revenue. It has a particularly high interest in toll roads.
“I initiated a holding in Vinci in October 2013,” said Roberts.
“It was added to the portfolio as a ‘utility-like’ business but with a better return profile, less reliance on leverage and was available on good free cash-flow yields.”
“Vinci has been a strong contributor to performance this year after reporting 2013 profits that beat analysts’ estimates. Its strong order backlog gives good visibility on 2014 earnings and it should provide a good dividend.”
Six IMA funds hold the stock in their top-10, including Capital International European Growth and Income, Jupiter European Income and Newton Continental European funds.
Kimberly-Clark
Kimberly-Clark is a personal care corporation that holds a significant market share in paper hygiene products in the US.
Roberts holds the stock in the top-10 of his fund because he says it understands the importance of good capital allocation.
“Over the past 10 years, the company has had a very consistent cash-flow return on investment: it has raised only a little bit of debt and has managed to grow the dividend per share at high single digits.”
“At the same time, the annualised total return is 10 per cent, so although on the face of it it may seem a very boring company, the risk-adjusted returns on offer over the last decade have proved otherwise. We would expect that to be the case from here.”
The only other fund to hold it in its top-10 is the £135m Capital International Global Growth and Income fund.
Fidelity Global Dividend has returned 39.6 per cent since Roberts took over in January 2012, compared with 34.4 and 33.45 per cent from its sector and benchmark, respectively.
Performance of fund vs sector and index since Jan 2012
Source: FE Analytics
