Q4 Outlook: A look at key issues, sectors as 2018 approaches
We believe there are opportunities in companies that continue to demonstrate strong fundamentals – despite the occasional distractions of the global news cycle.
Worldwide, a demographic trend has been growing — the population base is aging. And this movement is not limited to the U.S.; the eurozone and countries such as China and Japan are facing a similar demographic shift. For example, the aging population (60+) is expected to more than double by 2050.1 With Baby Boomers retiring and individuals living longer, we believe the need for income has never been greater. Interest rates and bond yields remain low, forcing investors to look elsewhere for yield. Funds that provide sustainable dividend yields may be increasingly popular with investors.
Robert Nightingale, portfolio manager of Ivy Global Equity Income Fund, believes an aging population base is providing fundamental support for dividend-paying equities.
Below are 3 examples of stocks we believe provide an attractive dividend yield and capital growth opportunity in an environment where investors are seeking income.
Johnson & Johnson (JNJ)
JNJ operates in three main segments: consumer, pharmaceutical and medical devices. The company has a number of leading brands in their consumer products line such as Tylenol, Zyrtec and Band-Aid. Additionally, they have a strong R&D pipeline across their entire enterprise focused on innovative patient care solutions.
With the increased need for health care solutions due to an aging global population, we feel that JNJ’s core businesses are market leaders in their industries and positioned well for continued free-cash flow and earnings growth.
Vinci SA (DG:FP)
VINCI SA engages in concessions and contracting businesses worldwide. The company designs, finances, builds and operates infrastructure and facilities comprising motorway, bridge and tunnel, airport, rail, stadium, and parking facilities.
Due to a global recovery and a renewed focus on infrastructure spending, we feel that VINCI’s market share will provide the foundation for future earnings growth and sustainable dividend yields.
Marine Harvest ASA (MHG)
MHG, a Norwegian-based fish farming company, is the world’s largest supplier of farmed Atlantic salmon. The farmer caters to more than 70 markets worldwide – satisfying one fifth of global demand. The company operates in Canada, Norway and Scotland and has seen annualized revenue growth of 14.5% over the last five years.
The company has been a beneficiary of a secular growth movement towards maintaining healthier eating habits. We feel that trend will continue, and provide the company capital growth and, as a result, a steady dividend payout.
Past performance is not a guarantee of future results. The opinions expressed are those of the Fund’s portfolio manager and are not meant as investment advice or to predict or project the future performance of any investment product. The opinions are current through September 30, 2017, are subject to change based on market conditions or other factors, and no forecasts can be guaranteed. The holdings discussed are for illustrative purposes only and are not intended as a recommendation to purchase, sell, or hold any specific security or to engage in any investment strategy.
JNJ: 2.5%, DG:FP: 2.0%, MHG: 3.1% of net assets as of 09/30/2017.
Risk factors: The value of the Fund’s shares will change, and you could lose money on your investment. International investing involves additional risks including currency fluctuations, political or economic conditions affecting the foreign country, and differences in accounting standards and foreign regulations. These risks are magnified in emerging markets. Fixed income securities are subject to interest rate risk and, as such, the net asset value of the Fund may fall as interest rates rise. Investing in high-income securities may carry a greater risk of nonpayment of interest or principal than higher-rated bonds. Dividend-paying investments may not experience the same price appreciation as non-dividend paying instruments. Dividend-paying companies may choose to not pay a dividend or the dividend may be less than expected. These and other risks are more fully described in the Fund’s prospectus. Not all funds or fund classes may be offered at all broker/dealers.