Buy, hold or sell: Fidelity Global Dividend

Published by on 14 June 2016.
Last updated on 14 June 2016

The £381 million fund is ranked third out of the 25 funds in the Investment Association (IA) global equity income sector over the period from its launch in January 2012 to the end of April.

It is ranked number one over three years, returning 33.7% against a sector average of 18.3%.

Roberts seeks 'companies with sustainable yields and dividend growth potential in order to provide a distribution to shareholders that grows every year'. The fund currently yields 2.9%.

Buy: General Electric (NYSE:GE)

General Electric has been a long-term underperformer, according to Roberts, due to a 'sprawling group structure'. For over a decade, he says, investor attitudes to the stock were apathetic at best.

For years its profit and loss statement was dominated by the financial services part of its business, GE Capital - but the vast majority of that asset base has been sold over the past year or so, along with a further disposal of other non-core industrial businesses.

This “will be a good catalyst for performance”, says Roberts.

He bought into GE in September 2015 at $24 (£16.60), and the firm now accounts for 3% of the portfolio. The share price has since climbed to $30.

GE is now dominated by three divisions - power and water, aviation and healthcare - which according to Roberts “operate in oligopolistic markets with very high barriers to entry”.

He therefore expects “a very resilient earnings profile, despite the element of cyclicality that is inherent with industrial businesses”.


Hold: Glaxosmithkline (LON:GSK)

Roberts aims to allocate around a quarter of his portfolio to the healthcare sector, a decision made back in early 2012, at a time when “it was a contrarian call to have such a large weighting to the sector”.

“I was confident that prospects [for the sector] would start to look much better as research and development started to pick up,” he explains.

“Demographics plus greater penetration into emerging markets are both strong tailwinds, offset slightly by pressures on healthcare budgets in developed countries.

“Valuation multiples in the sector looked attractive, especially relative to the wider market.”

Roberts bought into GlaxoSmithKline at the fund's inception at a price of 1,400p.

Although the company's share price has not progressed much in absolute terms (it is currently trading at 1,455p), on a total shareholder return basis including dividends, the shares have returned almost 32%.

GlaxoSmithKline currently yields 5.4%, which is high relative to current levels of cash flow. But Roberts is confident the dividend will not be cut.

Sell: Kraft Heinz (NASDAQ:KHC)

Roberts bought into Kraft Heinz at a price of $60 in December 2014, when it was Kraft Foods.

The firm, which was best known for its dairy products and soft drinks brands, was another contrarian pick in the face of an increased focus in the wider food and drinks sector on healthy eating and wellness.

With the shares trading on a free cash yield of 5% and a 4% dividend yield, Roberts says the valuation looked attractive, with an in-house Fidelity analyst also highlighting a “shareholder-friendly management team focused on growth in cash profits”.

After researching the company, Roberts concluded “there were similarities with Dr Pepper, a company already held in the portfolio, with its US-centric market positioning and management approach”.


The firm merged with Heinz in March 2015 - a deal that turned out to be favourable for Kraft shareholders, who received one-for-one shares plus a special dividend of $16.50 per share.

Roberts sold out on valuation grounds a year later at $76, despite the firm forecasting continued improvements in its margins - indeed, its share price has risen a further $4 since.

However, at the time the market was pricing in earnings before interest and tax of 30 per cent, which, according to Roberts, is well above industry norms. For this reason, the manager says, he could 'no longer justify the valuation from a risk/reward perspective'.