Press Releases
Newton's Harries and Pidcock Say Investors Missing Out on 90% of Income Opportunities
LONDON, 7 November 2005 — According to Newton Investment Management, 90% of companies with dividend yields greater than 3% are outside the UK. James Harries and Jason Pidcock, managers of two new Newton funds soon to capitalise on this global trend, believe that in a low growth environment investors are taking more notice of companies that pay a regular and rising dividend. Dividend income is forming an increasing part of an investment's total return.
"Over the last 10 years dividends have become more international. Companies are more focused on capital discipline and have responded to shareholder demands by paying a regular and increasing dividend, " says James Harries, manager of the Newton Global Higher Income Fund. "The UK is no longer the centre of the income universe."
Newton believes that committing to pay a dividend sharpens the minds of company boards. In an increasingly competitive marketplace, companies are more focused on cashflow and have reduced debt, enabling them to be more responsive to shareholder needs. Concentrating on cash generation and a strong fiscal discipline is needed to meet payments.
As the chart illustrates, the last decade has seen a rising trend in the number of companies with a dividend yield greater than 3%. More importantly, it demonstrates the global nature of this trend, with over 90% of the companies being outside the UK.
"Asian markets are of particular interest, as their increasing maturity and rising levels of pension fund investment have helped emphasise the need for regular dividends, " adds Jason Pidcock, manager of the Newton Asian Income Fund. "Healthier balance sheets and ongoing restructuring are driving the region forward, and this market is now one of the highest yielding areas in the world."
Underpinning the new launches is the highly successful yield discipline of Newton Higher Income Fund with strict buy/sell disciplines based on equity yields. This approach has proved to produce consistently strong performance over the long term, with 59.07% return over five years against a sector return of 24.48%*.
The new funds capitalising on these opportunities and offering global diversification for UK investors, Newton Asian Income and Newton Global Higher Income, will be launched on 1 December 2005, following a two-week initial offer period beginning on 15 November. During this offer period a discount will be available off the initial charge — reducing it to 3%.
Commenting on the launches, Mark Allpress, head of UK wholesale at Mellon Global Investments, the distributor of the funds, said:
"There is limited international high yield product available to satisfy the need for diversification and intermediary feedback supporting these funds has been very strong. Newton's Global Higher Income fund aims to help diversify investors' portfolios whilst maintaining a competitive yield. The Newton Asian Income fund has generated keen interest as it is one of the few open-ended investment vehicles available."
Newton Asian Income Fund will target a yield of over 4% and will invest in securities in the Asia Pacific ex. Japan region (including Australia and New Zealand). The fund manager, Jason Pidcock, will select holdings that have a prospective yield greater than the FTSE All World Asia Pacific ex. Japan Index yield; any holding whose prospective yield falls below a 15% discount to this will be sold.
Newton Global Higher Income Fund will also aim to offer a yield of over 4% and invest in a portfolio of global equities to achieve increasing annual distributions together with long-term capital growth. The fund manager, James Harries, will select stocks that have a prospective yield 50% greater than the FTSE World Index yield; any holding whose prospective yield falls below a 25% premium to this will be sold.
Newton Asian Income Fund & Newton Global Higher Income Fund will be sub-funds of the Mellon Investment Funds ICVC (Investment Company with Variable Capital), of which Newton Higher Income Fund is an existing sub-fund, and the investment adviser will be Newton Investment Management Limited. The Authorised Corporate Director is Mellon Fund Managers Limited which is authorised and regulated by the Financial Services Authority and a member of the IMA.
Key charges/minimum investments relate to Sterling Income Share Class:
Initial charge — 4% DISCOUNTED TO 3% DURING OFFER PERIOD OF 15-30 NOVEMBER
Annual Management Charge — 1.5%
Minimum investment — £1,000 or 50 a month
Minimum subsequent investment — £250
Newton Investment Management Limited is a London-based UK asset management subsidiary of Mellon Financial Corporation. With assets under management of almost £27 billion, the company provides a broad range of award-winning investment products and services to individuals, pension funds, charities and corporations. Newton has operations in London, Edinburgh, Leeds and Jersey. News and other information about Newton is available at www.newton.co.uk.
London-based Mellon Global Investments Limited is the international distributor of the investment skills and products of the asset management subsidiaries of Mellon Financial Corporation. Each of Mellon's asset managers is a specialist in its field. Their combined offering includes mainstream and high yield bond, cash, equity management, currency overlay, indexation and alternative investment management. Mellon Global Investments delivers these diverse skills to a wide and varied client base, providing a wealth of solutions.
Mellon Financial Corporation is a global financial services company. Headquartered in Pittsburgh, Mellon is one of the world's leading providers of financial services for institutions, corporations and high net worth individuals, providing institutional asset management, mutual funds, private wealth management, asset servicing, payment solutions and investor services, and treasury services. Mellon has approximately $4.5 trillion in assets under management, administration or custody, including
*Source Lipper to 30 September 2005, total return, including annual charges but excluding initial charges, income reinvested net of tax, in GBP. All information and figures source Mellon Global Investments unless otherwise stated as at 30 September 2005. This press release is issued by Mellon Global Investments Limited to members of the financial press and media and the information contained herein should not be construed as investment advice. Past Performance is not a guide to future performance.