How I find high-quality dividend shares

TL;DR

The Guinness Asian Equity Income Fund focuses on high-quality dividend-paying companies in the Asia-Pacific region, selecting from around 560 companies that have sustained a return on capital above their cost of capital for eight consecutive years.

Transcript

hello today i'm joined by edmund harris full manager of the guinness asian equity income fund the fund invests in high quality dividend paying companies based in the asia pacific region edmund could you firstly run through how many companies are in your investable universe and then how you narrow down that choice to hold less than 40 companies in t... Read More

Key Insights

• 🌏 The Guinness Asian Equity Income Fund focuses on companies in the Asia-Pacific region that have sustained profitable returns on capital.
• 🪛 Sustainable dividend growth is driven by companies that generate excess cash from reinvestment activities.
• 🏦 Dividend responses to the pandemic varied across countries and sectors, with technology-focused companies faring better than banks and materials companies.

Questions & Answers

Q: How does the Guinness Asian Equity Income Fund narrow down its investable universe?

The fund uses a metric called cash flow return on investment to screen and identify companies that have sustained at least an eight percent return on capital for eight consecutive years. They also have a debt-to-equity ratio requirement of no greater than one.

Q: How does the fund assess a company's ability to sustainably grow its dividend?

The key factor is the company's ability to generate excess cash from reinvestments. If a company is consistently generating more cash than it needs for reinvestment, it can distribute the excess as dividends.

Q: How did dividends in the Asia-Pacific region respond to the pandemic?

Dividends in the region fell by about 20% overall, but the decline varied across countries and sectors. Countries with a higher concentration of banks and materials companies experienced more significant cuts, while those with technology-focused companies saw more stable dividends.

Q: How did the Guinness Asian Equity Income Fund's holdings respond to COVID-19?

The majority of holdings in the fund did not cut their dividends. Out of 30 companies, 21 increased their dividends, two were flat, seven were down, and one omitted its dividend. Only a few companies had to respond to the pandemic by cutting dividends due to business stress or regulatory requirements.

Summary & Key Takeaways

• The fund narrows down its investable universe from 8,000 companies in the Asia-Pacific region to around 560 companies that exhibit sustained profitability above their cost of capital.

• Companies with sustainable dividend growth are those that generate excess cash from reinvestments, which is then distributed as dividends.

• Dividend responses in the Asia-Pacific region varied during the pandemic, with some sectors and countries experiencing more significant cuts than others.