If interest rates continue to come down then more investors would be likely to look beyond cash to generate an income. In this type of scenario a potential beneficiary could be the Fidelity Global Dividend Fund, which is one of Tom Stevenson’s fund picks for 2025.
Longstanding manager Dan Roberts prefers the cheaper European markets to the US and looks for a margin of safety in his stock picks. His strong valuation discipline and high conviction approach has resulted in a low turnover, low volatility portfolio that has earned a place on Fidelity’s Select 50 list of handpicked funds.
Objective and approach
Fidelity Global Dividend aims to generate capital growth with low volatility compared to the MSCI All Country World Index. It also seeks to pay an income that is at least 25% more than that produced by the benchmark. Please note this is not guaranteed.
Roberts uses an unconstrained bottom-up approach to invest in companies that offer a healthy dividend yield underpinned by a growing level of income, as well as the potential for capital growth. A key part of the process is the sustainability of the distributions and whether the current share price provides an adequate margin of safety.
It is a conservatively managed fund that focuses on stocks with predictable, consistent cash flows and simple, understandable business models with little or no debt on their balance sheets. This is reflected in the low annualised volatility of 7.6%1 versus 16.4%2 for the index.
The underlying portfolio
Roberts has put together a concentrated portfolio of just 40 holdings with the 10 largest positions accounting for 33.6% of the assets. These include companies such as: Unilever, Deutsch Boerse, Munich Re, Progressive Corp and Taiwan Semiconductor3.
Top-10 holdings
- Unilever
- Deutsche Boerse
- Taiwan Semiconductors
- Munchener Ruckversicherungs-Gesellschaft
- BlackRock
- Progressive Corp
- RELX
- National Grid
- Legrand
- Iberdrola
Source: Fidelity International, 31 December 2024
The geographical split varies enormously from the index with the most favoured area being Europe ex UK, which makes up 31.6% more than the benchmark and is followed by the UK where the allocation is 12.8% overweight. These are counterbalanced by the US that is a full 39.3% underweight3.
There are also sizeable differences at the sector level where Financials, Industrials and Consumer Staples are all around 8% above the index. The largest underweight is Information Technology that is almost 17% below the benchmark3.
Performance
Over the last 5 years the W accumulation share class has achieved cumulative growth of 53.6%, which is well behind the 74.3% generated by the index3. This is largely due to the significant underweight position in the US, which has driven the market higher, but is an area where valuations have become more stretched. Past performance is not a reliable indicator of future returns.
What are the managers’ latest views?
Writing in the latest accounts, Roberts says that he remains confident in the outlook for the portfolio holdings, whose performance is not reliant on the continued momentum in the Artificial Intelligence (AI) theme nor on a particular macro scenario playing out.
“I remain focussed on investing in attractively valued stable businesses with strong balance sheets, resilient earnings and higher margins which should drive a significantly better risk-adjusted return than the market, alongside an attractive yield and a growing dividend.”4
Attractive yield
Investors who are primarily interested in generating an income can earn an attractive distribution yield of just over 4% from the W income share class. This is paid on a quarterly basis and is not guaranteed.
How do the costs stack up?
The latest ongoing charges figure is 0.92%, which is fairly typical for an actively managed global equity fund.
Who is it suitable for?
Fidelity Global Dividend can be a useful addition to a portfolio that is seeking a combination of growth and income. Ideally it requires a long-term holding period of 10 years or more to allow the returns to come through, as the fund is towards the higher end of the risk spectrum.
More on Fidelity Global Dividend Fund
| (%) As at 31 Dec | 2019-2020 | 2020-2021 | 2021-2022 | 2022-2023 | 2023-2024 |
|---|---|---|---|---|---|
| Fidelity Global Dividend | 6.0 | 12.8 | 0.2 | 9.5 | 13.5 |
Past performance is not a reliable indicator of future returns
Source: Morningstar, total returns from 31.12.19 to 31.12.24. Excludes initial charge.
Source:
1 Fidelity, factsheet 30 November 2024, annualised standard deviation measured over 3 years
2 MSCI, MSCI ACWI, 31 December 2024, annualised standard deviation measured over 3 years
3 Fidelity, factsheet 30 November 2024
4 Fidelity, interim report for the 6 months to 31 August 2024