Invesco Select: Global Equity Income 18 February 2019
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by Invesco Select: Global Equity Income. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
IP Select Global Equity Income Share Portfolio (IVPG) aims to achieve a growing level of income return each year, with capital appreciation over the long term, through a concentrated but diversified portfolio of global equities.
IVPG's portfolio is relatively concentrated, comprising of approximately 52 stocks. The team, led by Nick Mustoe, look to invest in high-quality companies at attractive valuations, offering appealing yields, sustainable income and capital upside.
Over the long term, the trust has met its aim of achieving strong total returns and the emphasis on dividend growth, rather than investing for the highest achievable yield, has meant that the trust has outperformed peers. Since the team took over the portfolio in late 2012, the trust has outperformed many of its investment trust and open-ended peers by a country mile, delivering 34% and 24.1% greater returns than the Morningstar IT Global Equity Income sector and the IA Global Equity Income sector respectively.
The portfolio currently yields 3.7%, and at a portfolio level the managers expect growth in earnings and dividends at around 6-7%. Shareholders have seen substantial year-on-year increases in income payments, with full-year dividends growing at a rate of 14.5% p.a. over the past five years.
So far in FY19, three interim dividends have been announced. The latest, in December, equated to 1.5p and the Directors announced that they have a target of at least maintaining the previous year’s dividend (6.7p). The Company also employs a dividend policy which looks to smooth pay-outs through returns of capital, whilst actively controlling the discount. Historically this has prevented the trust’s shares from slipping to a significant discount to NAV and currently the discount is -2%.
There are many things to like about IVPG. Comprised of just over 50 stocks, the relatively concentrated portfolio is built up of numerous high-quality companies, which either offer attractive yields or dependable income growth and capital upside. Although the current yield of 3.7% is below the average in the Global Equity Income sector, the dramatic outperformance in NAV terms the trust has delivered in comparison to the open and closed-ended peer groups (since Nick and the team took over) more than makes up for it. Alongside the strong returns, the manager has been able to grow the full year dividends at close to 15% per annum, over double the weighted average in the global equity income sector.
|Well resourced, team approach to global investment
|Lower initial yield
|Strong dividend growth
|Relatively small size could make it hard for institutions to own the trust
|Zero tolerance approach to discount means the trust is much more liquid than its size would suggest