‘None of our stocks have cut their divis during the crisis’

The coronavirus crisis and economic freeze has caused scores of businesses, either from lack of cash or out of prudence, to cut or suspend shareholder payouts. Even Shell was forced to slash its dividend for the first time since the Second World War and forecasts suggest more than half of shareholder payouts across the London market could disappear this year.

It will have a dramatic effect on investors’ incomes and overall returns, but the £946m Guinness Global Equity Income Fund has managed to escape the worst of the cuts so far. Returns are down 3.7pc since January but peers have lost 11pc on average. None of the holdings in the portfolio have cut or stopped paying dividends.

Telegraph Money spoke to the managers about shielding investors’ income and how they are planning to maintain the fund’s historic 3pc yield.

WHO IS THE FUND FOR?

Matthew Page (MP): It is designed to provide dividend income at all times by investing in companies that can afford to keep paying out. Our investors are looking for income but some also want dividend income to be reinvested to grow their savings.

HOW HAVE YOU AVOIDED DIVI CUTS?

Ian Mortimer (IM): Firms are cutting payouts for a number of reasons. The banks, for instance, have been forced to by the Government so they can focus on lending to struggling businesses and individuals. Others have had to due to the financial pressures of the virus and to shore up cash – the airlines, for example, which have been particularly badly hit. In our portfolio though, we tend to only buy firms with enough cash to be in the best position to be able to pay. As a result we have avoided investing in things like hotels, airlines and we have never owned a bank stock, as they do not meet our criteria.

So none of our companies have had to cut their payouts so far and indeed we are seeing some growth in the dividends of some of our consumer and healthcare stocks.

With payouts hard to come by Harry Brennan spoke to the managers who are sustaining income during the pandemic

WHAT HAVE YOU CHANGED?

IM: In February we sold our positions in media firm WPP and in oil giant Royal Dutch Shell. After this the oil price collapsed and Shell cut its dividend. With WPP we sold as they had weak results and we did not want to own it in the changing environment. After we sold it the firm also cut its payout, so we got out at a good time with both. In March we also sold Randstad, the Dutch recruitment company, which again subsequently slashed its shareholder payout. It will be a tough time for recruiters during a recession with more people out of work or less willing to leave the security of a long-held role. We sold all these firms as the virus spread from China and we started to realise it was going to be a significant world event.

But we have bought some new shares too: PepsiCo, the drinks brand, which we have held before; Medtronic, an American healthcare firm; and Otis, a spin-out business of United Technologies, which we already owned. It makes things like elevators and lifts and you might think industrials are in for a tough time, but

the business makes a lot of money from servicing, which provides a reliable income stream.

WHERE WILL THE BEST DIVIDENDS COME FROM NOW?

MP: Historically America has had a lower dividend yield compared with Britain and Europe but that is because US firms tend to split payouts with share buy-backs. But when the economy turns, as today or in the financial crisis, American firms normally stop the buy-backs but maintain their dividends better than in other markets.

So while the American dividend

£1,000 invested at launch would be worth £2,496 today