Finding Dividend Winners in 2018

Matt Williams, a director in the European equities team at BlackRock, tells IGTV’s Victoria Scholar how to invest in dividend stocks in 2018. 

The value of investments can fall as well as rise, and you may get back less than you invested. Past performance is no guarantee of future results

The global economy is enjoying a synchronized upswing. National gross domestic product (GDP) figures and unemployment rates are improving across many parts of the world, while inflation remains under control. Last year was the first year since 2010 that all the G20 economies expanded. The strong economic fundamentals are spurring asset price gains, notably in equities.

Growth versus yield

Matt Williams, a director for European equities at BlackRock, gives his thoughts on the company’s Continental European Income Fund for 2018. He says the fund is more focused on dividend growth than on dividend yield. While high-yield in equity income can look alluring, Williams believes the higher payout is often a red flag signaling dividend risk or low growth. He says it is important to be selective in sectors like financials, utilities and energy where yields are high. He gives Telefonica as a good example of a carefully selected high-yield stock.

Positioning

The fund is currently overweight on continental Europe as an end market, with exposure to the recovering eurozone economy through infrastructure businesses, high quality industrials and carefully selected financials. In 2017, the fund capitalized on political risk expressed in the market, by using the dips as buying opportunities. It invested in the Italian online bank Finecobank, along with Bouygues Telecom in France. Other stocks in the portfolio include Enel in infrastructure, Deutsche Post in consumer and Astra Zeneca to play its research and development-led growth investment theme.

Emerging markets

On emerging markets, the fund believes many stocks with exposure to them (especially within the autos and mining sectors) are too volatile for the portfolio. BlackRock says its focus within the context of this fund is to build a resilient portfolio, which will ultimately reward patient investors.

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