Monthly video update – December 2017

In this update Mark Whitehead, Portfolio Manager, highlights the importance of assessing the sustainability of a company’s distributions to shareholders, following a halving of the dividend by a major US industrial conglomerate.

5 December 2017

Investment Video Update Dec 2017 Play Play Video
Mark Whitehead with an update on Securities Trust - December 2017

Video Transcript

What caught your eye this month?

  • General Electric, one of America’s largest industrial conglomerates and a former dividend aristocrat, announced a halving of its dividend during the month.
  • This is a clear reminder of the importance of assessing the underlying sustainability of a company’s dividends, something we place at the heart of our analysis.
  • Indeed, General Electric, which has been paying a dividend in excess of its free cash flow for a number of years, was never going to make it through our research system, no matter how attractive the headline yield looked.

What currently interests you?

  • We have recently bought a position in one of Canada’s largest communications companies, which we believe offers a breadth and scope of products and services that are not easily replicated.
  • Its strong market position, and healthy credit profile, will enable it to grow and drive the uptake of new products, such as high-speed fibre and internet TV. From a yield perspective, the company offers investors a growing dividend of around 4.5%.

What is the outlook for the next few months?

  • Our near-term outlook continues to be shaped by how robust and confident corporates appear to be right now.
  • We are watching how equity markets digest interest rate increases and the gradual reduction in other central bank support.
  • However, irrespective of the dynamics here, we believe high-quality, dividend-paying equities with sustainable growth prospects remain one of the most attractive investment avenues on offer.