As at the end of January 2023, the MSCI World Dividend Masters Index had outperformed its parent index, the MSCI World, over 3, 5 and 10 years. The Dividend Masters index consists of companies that have consistently increased dividends every year for at least 10 years.
As managers of the Sanlam Sustainable Global Dividend Fund, we focus on owning a select number of companies that exhibit strong sustainability and dividend credentials. As dividend investors we are more interested in dividend growth than dividend yield. We particularly like companies, like the Dividend Masters, that can grow dividends consistently over time.
Why do such companies have an impressive performance history and how do we find them? We believe dividend consistency to be the result of a combination of strong competitive positioning, healthy capital allocation, and consistency in financial outcomes. This combination is highly appealing for investors which explains the positive performance.
We tailor our company analysis to find companies with such attributes. Our industry analysis helps us understand the competitive forces that shape an industry and how a company’s business model deals with those forces. We prefer companies with robust business models in industries where they can enjoy long term profitability. Our balance sheet analysis enables us to assess if a company has enough liquidity and not too much leverage. Getting that balance wrong spells trouble. Accounting analysis helps us decipher if a company is at risk of bankruptcy or guilty of manipulating its financials. Our dividend analysis ties together the previous analyses to help us understand how sustainable a company’s dividends are and under what scenarios future dividend payments may be at risk.
We describe our company analysis as robust and repeatable. It follows that we want our portfolio holdings to be robust companies with repeatable financial outcomes. These companies should have every chance of being masters of the universe.
Fund risks
The Fund has holdings which are denominated in currencies other than sterling and may be affected by movements in exchange rates. Consequently the value of an investment may rise or fall in line with the exchange rates.