Gervais Williams: my four dividend stocks for 2022 | Summary and Q&A

TL;DR

Chinese growth moderation and wage inflation pose risks to global markets, while inflation pressures are expected to moderate in 2022. Dividend growth may vary across sectors, with some companies in sectors like corporate finance and insurance services poised for growth.

Key Insights

• 🌐 Chinese growth moderation poses a risk to global growth.
• 😘 Wage inflation may lead to margin pressure and lower turnover growth for many companies.
• 🍉 Inflation pressures are expected to moderate, but ongoing wage inflation can have long-term consequences.
• 👨‍💼 Companies with outstanding customer service and retention can defend their business against competitors.
• 🤘 The recovery of UK dividends in 2022 may vary across sectors, with mining and metals companies potentially experiencing declines.
• 💪 Opportunities for dividend growth can be found in companies with strong cash generation and market positions, such as K3 Capital and Randall Quilter.
• 🛀 The financial sector, including companies like Just Group and Man Group, shows potential for dividend growth.
• 🥹 UK banks listed in the FTSE 100, such as NatWest and Lloyds, have small holdings but are being monitored for potential dividend growth.
• ❓ The interviewer has personal investments in their own funds and the management company.

Transcript

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Questions & Answers

Q: What are the main risks to markets heading into 2022?

The main risks are Chinese growth moderation and wage inflation. Chinese growth has been a cornerstone of global growth, and its moderation could make global growth more challenging. Wage inflation could lead to margin pressure and lower turnover growth for many companies.

Q: How concerned are you about rising levels of inflation?

While inflation is a concern, the pressures are expected to moderate in 2022. Chinese growth moderation, slowing activity due to COVID variants, and peaking oil and metal prices contribute to this expectation. However, ongoing wage inflation could lead to companies becoming insolvent and create long-term inflationary risks.

Q: Is pricing power a significant factor for you in the current inflationary environment?

Pricing power is important, but the ability of companies to hold onto margin is heavily related to customer service and frontline staff engagement. Outstanding customer service and retention can help companies defend their business against competitors offering cheaper prices.

Q: What is your outlook for UK dividends in 2022?

While some companies may continue to grow their dividends, others in sectors like mining and metals may see dividend growth decline due to potential decreases in profits. Companies that can generate surplus cash and demonstrate strong dividend growth potential, such as K3 Capital and Randall Quilter, are expected to perform well.

Summary & Key Takeaways

• Chinese growth moderation could negatively impact global growth and markets.

• Wage inflation may lead to margin pressure and decreased turnover growth for many companies.

• Inflation pressures are expected to moderate, but ongoing wage inflation could impact global growth and lead to long-term inflation.