Bestinvest says
More companies the world over are realizing the importance of paying dividends and there are not yet many US equity income funds. It may be a good idea for Bestinvest clients to diversify sources of income away from the UK equities. The team on this fund have a track record of running this strategy in the US from 2008 and before this running a similar strategy but without a specific dividend requirement. The CIO Hersh Cohen has used this same investment process for 40 years. Currently the target portfolio yield is 4½% which is attractive. This fund should be on Select, Cofunds and FundsNetwork platforms.
Idea Generation - Universe broadly defined as securities having an attractive & sustainable income stream. Ideas sourced by portfolio managers and analysts. Typically look at $3bn market cap or higher. Will look at non-equities to provide yield advantage, especially during periods of market dislocation
Dividend & Valuation Analysis - Yield evaluated based on relative and absolute attractiveness. Capacity for dividend payment growth also assessed. Balance sheet strength and dividend sustainability evaluated. Strength implies investment grade rating on debt. Look for sustainably high margins and ROIC. Analyse credit statistics. Payout ratio assessed as % of Free Cash Flow
Portfolio Construction & Risk Controls - Automatic review if dividend is cut/suspended. Watch list for securities with price drops.Quarterly review by independent risk committee. Incorporate top down views primarily on areas of market to avoid.