Lonsec awards ‘Recommended’ rating to Apostle Dundas Global Equity Fund

Karyn West

Independent investment research house, Lonsec, has awarded a ‘Recommended’ rating to the Apostle Dundas Global Equity Fund (the Fund).

The Fund is focused on sustainable dividends from long-term investment in global equities across developed and emerging markets.

Investment manager Dundas Global Investors (Dundas) aims to build a diversified portfolio of between 60-80 stocks with sustained business and dividend growth to achieve long-term capital growth. Strong qualitative and financial research and analysis underpins the Dundas investment criteria. The Fund has typically outperformed in weaker markets and underperformed in strongly rising markets.

The firm’s Senior Partner, Alan McFarlane, explains, “We pick stocks capable of sustained dividend growth and avoid the majority that aren’t. Our companies provide products and services bought by more customers year after year. Rising sales produce increased profit and cash flow which is applied first in reinvestment for future growth and second to pay each year’s dividends. Good companies run by excellent boards and management make repeated good capital allocation decisions, avoiding unnecessary financial risk to reduce the risk of dividend cuts. Consistent reinvestment by growing companies is the foundation for future dividend growth and our strategy’s success.

“In 2020 global dividends suffered a 13% reduction – just under $175 billion – with the cuts concentrated in industries most affected by lockdown and others that struggled because of changing demand patterns and / or poor capital allocation decisions. Avoiding those industries and companies was key to our recent results. COVID-19 exposed the difference between sustainable businesses and the rest.” Mr McFarlane said.

“Dividend growth investing is often confused with investing for high-yield but they are chalk and cheese. 2020 exposed the difference between on the one hand companies capable of sustained dividend growth because of the industries they operate in and the way they are managed and, on the other, over-distributing companies whose high yields signal their lack of opportunity to reinvest for future growth. Sustained dividend growth coupled with sound corporate financial governance are the keys to why dividend growth portfolios play defence well.” Mr McFarlane added.

The Fund’s Recommended rating can be attributed to the highly experienced professionals from both Dundas and Apostle Funds Management.

Karyn West, Managing Director, Apostle Funds Management (AFM) said, “During 2020, the best dividend policy for most companies was to hold cash to fund their business during the tough times experienced in a pandemic environment. Ordinarily Dundas likes to primarily see Boards allocating profits to help grow the business and then subsequently reward shareholders with a sustainable dividend year-on-year.

“Finding businesses that have good return on equity, good margins and pricing power are important as global economies find their feet within the challenges of the pandemic,” Ms West said.

Ms. West welcomed Lonsec’s Recommended rating as positive affirmation for the Fund, AFM and its global equity partners Dundas. “Our key focus at AFM is to provide investment strategies that meet a genuine client need. Advocating for clients’ interests and finding best-of-breed investments from around the world is at our core.”

Ms. West concluded: “We are pleased to be building strong momentum in providing targeted, hand-picked investment opportunities for our clients. Partnerships with quality asset managers like Dundas enable us to support client objectives via access to bespoke product solutions.”