Fund Launch: Fidelity offers stable returns with a growing income stream in volatile times

Fidelity Worldwide Investment is offering a new fund with a projected annual income of 3.6 percent payable monthly to investors seeking inflation protection and steady capital growth. 
The Fidelity Global Dividend Fund invests in companies which consistently pay out dividends and have a robust business model. This means that investors can receive a healthy and regular income at a time when interest rates on cash are at historic low levels and below the rate of inflation. Equity income currently compares very favourably to bond funds – a situation which could prevail for some time. The fund will be launched on Monday January 30.

“Frayed nerves caused by problems in the eurozone and unease about a global recession are encouraging investors to look for greater security and regular, stable sources of income. My aim is to meet this need in the continuing uncertain market environment by offering investors the Fidelity Global Dividend Fund. The fund is directed towards stable, long-term growth with lower volatility than the broader market and a dividend income growth that aims to beat inflation,” explains Dan Roberts, Fund Manager of the new Fidelity Global Dividend Fund. “The fund plans to achieve this objective by concentrating on companies which offer sustainable dividend growth coupled with a good ‘margin of safety’ afforded by a healthy balance sheet and valuation support. The long-term share price growth of companies with a strong dividend history is also generally above the average for the market and shares in these companies tend to be less volatile than the equity market overall. This means that investors who do not require income can reinvest the dividends to achieve a total return which should be less volatile and lower risk than the broader equity market.”

The Fidelity Global Dividend Fund distributes income monthly. The target net payout is 3.6 percent per annum. This means that income is actually above the average current return on corporate bonds and significantly above the yields on cash. A combination of capital growth together with the commitment to income growth sets the Fidelity Global Dividend Fund apart from existing income funds. The manager also has maximum flexibility when selecting companies to invest in because the fund is unconstrained which means that the positioning in terms of country and sector is likely to deviate significantly from the MSCI All Country World Index. The manager invests in companies on their own merits, not just because of their existence or size in the reference index.

The best of both worlds: stable income and opportunities for capital growth
Asgeir Thordarson, Head of Nordic region, Fidelity Worldwide Investment: “Equities generating strong dividends are more attractive in the current market environment than they have been for a long time. In my personal view this really is the right moment to invest in a dividend or income fund. We are complementing our existing range of regional dividend funds from Asian and European markets with the Fidelity Global Dividend Fund.”

Up to now, dividend funds have tended to concentrate on European equity markets. However, this means that there are still untapped opportunities offered by lots of successful companies in a globalised world. Just under 550 companies from the MSCI World All Country Index generate a dividend yield in excess of 4 percent. Not even half as many companies from MSCI Europe offer this rate. Almost 100 companies in theUSAalone have been continuously increasing their dividend payments over the past 25 years and their payouts have therefore provided a consistent income stream for investors. Global yields are currently above the average values over the past 51 years and above-average dividends are also projected for 2012. “The Fidelity Global Dividend Fund currently offers investors the combination of capital and income growth, not targeting stocks just because they have a high yield as this means increased capital risk, but striking a balance between stocks with a high yield today and those which have the potential for future dividend growth”, according to Asgeir Thordarson.

Long track record of experience with dividend funds and global research
The fund is unconstrained and therefore has complete flexibility in the search for genuine yield premium and dividend growth. A key indicator for the strategy pursued by Dan Roberts is the deliberate shunning of companies only demonstrating high dividends on an occasional basis if the risk exposure of the portfolio overall would rise as a result. Dan has over ten years’ experience in picking shares with high dividends and strong growth.

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