Yield scarcity and the case for dividends
Upcoming SlideShare
Loading in...5
×
 

Yield scarcity and the case for dividends

on

  • 821 views

 

Statistics

Views

Total Views
821
Views on SlideShare
583
Embed Views
238

Actions

Likes
1
Downloads
4
Comments
1

7 Embeds 238

http://bolsa.com 124
http://www.citywire.co.uk 62
http://citywire.co.uk 25
http://shakespeare 13
http://shakespeare.cw-london.co.uk 11
http://m.citywire.co.uk 2
http://www.gizoogle.net 1
More...

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel

11 of 1

  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
  • How are you today,
    i hope fine,my name is miss blessing, i saw your profile today at (www.slideshare.net) and i became interested in you i will also like to know more about you, and i will like you to send an email to me so that i can send my photos to you, remember that distance, color or language does not matter but love matters allot in life, am waiting for your reply in my E-mail ID at blessingandrew3@yahoo.com have a nice day yours blessing.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Yield scarcity and the case for dividends Yield scarcity and the case for dividends Presentation Transcript

    • Yield Scarcity and the Case for Dividends Colin Morton Manager, Franklin UK Equity Income FundFor Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 1 The Dilemma Facing Many Investors Their investments are at a standstill Lehman Brothers Gulf Oil 2009 FTSE UK Double Dip Bankrupt Spill Hits Bottom Recession Banking Japanese Fears of a Chinese European Debt Scandals Tsunami Hard Landing CrisisFor Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 2 But, their investment goals remain the same BUYING A HOME UNIVERSITY EDUCATION RETIREMENTFor Professional Investor Use Only. Not for Distribution to Retail Investors.
    • The Importance of DividendsFor Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 4Dividends Are Critical to Delivering Long-Term Returns 600% 500% 400% Dividend Return 300% 200% 100% Capital Return 0% -100% 1 Year 3 Years 10 Years 15 Years 20 Years 25 YearsSource: Morningstar Direct®. © 2012 Morningstar UK. All rights reserved. Based on FTSE 100 TR Index, in GBP as at 31/07/12. Past financial performance is no guarantee offuture results. Due to rounding the percentages shown may be within 0.1% tolerance of the true value.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 5 FTSE High Yield Relative to FTSE Low Yield (15yr) 300 250 200 150 100 50 0 FTSE 350 High Yield TR GBP FTSE 350 Lower Yield TR GBPSource: Morningstar Direct®. © 2012 Morningstar UK. All rights reserved. Based on FTSE 100 TR Index, in GBP as at 31/0712. Past financial performance is no guarantee offuture results. Due to rounding the percentages shown may be within 0.1% tolerance of the true value.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 6 Why Dividends Are Important• Significant contribution to the total returns• Higher yielding stocks tend to outperform lower yielding stocks over the long-term• More resistant to volatility because of “yield-support”• Ability to pay cash dividends demonstrates underlying health of a companyFor Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 7 The Problem of Going with the Flow 12-Month Forward Price/Earnings Ratio 24 22 20 18 16 14 12 10 8 6 4 1986 1990 1994 1998 2002 2006 2010Source: © 2012 Oriel Securities Limited; © 2012 FactSet Research Systems Inc.*. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research SystemsInc. and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its contentproviders are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 8 Now may be a very good time to increase equity allocations – with P/E ratios typically below 10 Starting Year Price Earning Ratio and 10-Year Average Annual Real Returns 12 10.8 10 8 7.6 6.1 6 4.9 4 1.8 2 0.8 0 Less than 8x Between 8x and Between 10x and Between 12x and Between 14x and More than 16x 10x 12x 14x 16xSource: © Oriel Securities Limited.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 9 Gilt Yields Have Been Trending Down Since 1975 UK 10-Year Gilt Yields 26 24 22 20 18 16 14 % 12 10 8 6 4 2 0 1915 1921 1927 1933 1939 1945 1951 1957 1963 1969 1975 1981 1987 1993 1999 2005 2011 Yield (%) AverageSource: © Oriel Securities Limited.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 10 Gilt Yields Have Now Dropped Below Dividend Yields 12-Month Forward Dividend Yield and 10-Year Gilt Yield 14 12 10 % 8 6 4 2 0 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 Dividend yield (%) Gilt yield (%)Source: © 2012 Oriel Securities Limited; © 2012 FactSet Research Systems Inc.*. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc.and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its contentproviders are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 11 The Number of Companies with Net Cash is Climbing Steadily Higher FTSE 350 Index 82 84 77 76 72 68 66 63 58 51 48 45 9 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012Source: © 2012 Oriel Securities Limited; © 2012 FactSet Research Systems Inc.*. All Rights Reserved. The information contained herein: (1) is proprietary to FactSet Research Systems Inc.and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither FactSet Research Systems Inc. nor its content providersare responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results; FTSE. FTSE™ is a trademark of London StockExchange Limited and The Financial Times Limited and is used by FTSE International Limited under licence. Neither FTSE nor its licensors shall be responsible for any error or omission inthe FTSE 350 INDEX.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 12 GlaxoSmithKline Ordinary Shares Prospective Yield 4.92% Prospective Free Cash Flow Yield 8.40% Interest Cover 13.00x 6.375% 2039 Redemption Yield 4.25% 5.625% 2017 Redemption Yield 1.18% Assuming Inflation of 2% - Nominal Dividend Growth Required to Hit Long-Term Real Equity Return of 5% is (5%+2%=7%-4.92%)=2.08% Last 5 Year Dividend Growth 9.02%Source: Franklin Templeton Investments and Bloomberg as at 13/08/2012.This is an example of an investment purchased pursuant to investment advice of Franklin Templeton Investment Management Ltd; the investment may or may not be currently held byFranklin Templeton funds. This is not a complete analysis of every material fact regarding an industry, security or investment and should not be viewed as an investmentrecommendation. The actions taken with respect to this investment, and its performance, may not be representative of other advice or investments. Factual statements are taken fromsources considered reliable, but have not been independently verified for completeness or accuracy by the fund’s manager or its affiliates. These opinions may not be relied upon asinvestment advice or an offer for a particular security or as an indication of trading intent for any Franklin Templeton fund. Past performance does not guarantee future results.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 13 BAT Ordinary Shares Prospective Yield 3.95% Prospective Free Cash Flow Yield 6.70% Interest Cover 13.5x 5.75% 2040 Redemption Yield 4.52% 5.375% 2017 Redemption Yield 1.17% Assuming Inflation of 2% - Nominal Dividend Growth Required to Hit Long-Term Real Equity Return of 5% is (5%+2%=7%-3.95%)=3.05% Last 5 Year Dividend Growth 16.56%Source: Franklin Templeton Investments and Bloomberg as at 13/08/2012.This is an example of an investment purchased pursuant to investment advice of Franklin Templeton Investment Management Ltd; the investment may or may not be currently held byFranklin Templeton funds. This is not a complete analysis of every material fact regarding an industry, security or investment and should not be viewed as an investmentrecommendation. The actions taken with respect to this investment, and its performance, may not be representative of other advice or investments. Factual statements are taken fromsources considered reliable, but have not been independently verified for completeness or accuracy by the fund’s manager or its affiliates. These opinions may not be relied upon asinvestment advice or an offer for a particular security or as an indication of trading intent for any Franklin Templeton fund. Past performance does not guarantee future results.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • AppendixFor Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 15 Franklin UK Equity Income Fund Fund Details Management Colin Morton Asset Category UK Equity Investment Style Blend IMA sector UK Equity Income Benchmark FTSE All Share Index OEIC Launch Date 17/10/2011 Number of Positions 51 Portfolio Size £143.5 millionSource: Franklin Templeton Investments, as at 31/07/12. Portfolio holdings are subject to change. On 17/10/2011 Franklin UK Equity Income Fund was launched to receive theassets of the Rensburg UK Equity Income Trust. Fund performance data from 29/04/1988 is based on the mid-price of the trust and from the 17/10/2011 it is based on the net assetvalue of the fund’s A(inc) share class. © Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) maynot be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or lossesarising from any use of this information.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 16 Yield Comparisons Franklin UK Equity Income Fund 4.20% (Historic Yield) FTSE All Share Index 3.65% (Historic Yield) Current Yield Premium of Fund 115.00% UK 10 Year Bond Yield 1.47% Current UK Base Rate 0.50%Source: Franklin Templeton Investments and Bloomberg as at 31/07/12.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 17 Franklin UK Equity Income Fund Performance 1 Year 2 Years 3 Years 5 Years 10 Years Franklin UK Equity Income Fund A(inc) 6.68% 24.20% 43.29% 11.84% 108.04% FTSE All Share Index 0.37% 15.36% 37.68% 6.86% 101.97% IMA UK Equity Income Sector 3.06% 18.04% 39.51% 3.32% 94.79% Quartile Ranking 1 1 2 2 2Source: Franklin Templeton Investments and Morningstar as at 31/07/12. © 2012 Morningstar, Inc. All rights reserved. The Franklin UK Equity Income Fund launched on 17October 2011 to receive the assets of Rensburg UK Equity Income Trust, a unit trust. Fund performance data is based on the mid price of Rensburg UK Equity Income Trust fromits launch on 31/08/1987 to 31/09/2011 and the net asset value of the Franklin UK Equity Income Fund A(inc) shares thereafter. The fund charges all or part of its management 17fees to capital. This could lead to a higher level of income but may constrain capital growth. Past performance is no guarantee of future performance.For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 18Fund Manager Biography Colin Morton Vice President, Fund Manager Franklin Templeton Fund Management Location: Leeds, UK Mr Morton is the Lead Manager of Franklin UK Equity Income Fund and Franklin UK Blue Chip Fund and specialises in large cap UK equity analysis and investment. Colin joined Franklin Templeton Investments when it acquired Rensburg Fund Management in January 2011. Colin began his career in 1983 as a trainee stockbroker with Wise Speke & Co. He joined, Rensburg in 1988 as a Private Client Executive, becoming an Investment Manager in 1991. He became the Manager of Franklin UK Equity Income Fund in January 1995, Manager of the UK Blue Chip Fund in September 2000 and has been a Joint Manager of the Franklin UK Managers’ Focus Fund since its launch in September 2006. Colin holds an Investment Management Certificate (IMC) and is a Fellow of the Securities Institute (FSI).For Professional Investor Use Only. Not for Distribution to Retail Investors.
    • 19Important InformationFor professional investor use only, this document is not aimed at, nor intended for use by retail investors.Copyright © 2012 Franklin Templeton Investments. All rights reserved.This document is intended to be of general interest only and does not constitute legal or tax advice nor is it an offer for shares or invitation to apply for shares in the Franklin UKEquity Income Fund. Nothing in this document should be construed as investment advice. Opinions expressed are the authors at publication date and they are subject to changewithout prior notice. Performance details provided are in GBP, include the reinvested dividends net of basic rate UK tax and are net of management fees.On 17/10/2011 Franklin UK Equity Income Fund was launched to receive the assets of the Rensburg UK Equity Income Trust. Fund performance data from 29/04/1988 is based onthe mid-price of the trust and from the 17/10/2011 it is based on the net asset value of the fund’s A(inc) share class. The fund charges all or part of its own management fees tocapital. This could lead to a higher level of income but may constrain capital growth. Past performance is no guarantee of future performance.© 2012 Morningstar, Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar; (2) may not be copied or distributed; an (3) is not warranted to beaccurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.The price of the shares in the fund and the income received from it can go down as well as up, and investors may not get back the full amount invested. Currency fluctuation mayaffect the value of overseas investment. An investment in the Fund entails risks which are described in the Fund’s prospectus and in the relevant Key Investor InformationDocument. Subscriptions to shares of the Fund can only be made on the basis of the current prospectus, the relevant Key Investor Information Document, accompanied by thelatest available audited annual report and the latest semi-annual report if published thereafter. No shares of the Fund may be directly or indirectly offered or sold to nationals orresidents of the United States of America. Shares of the Fund are not available for distribution in all jurisdictions and prospective investors should confirm availability with their localFranklin Templeton Investments representative before making any plans to invest.References to indices are made for comparative purposes only and are provided to represent the investment environment existing during the time periods shown. An index isunmanaged and one cannot invest directly in an index. The performance of the index does not include the deduction of expenses and does not represent the performance of anyFranklin Templeton Group fund.For a free copy of the latest prospectus, and the relevant Key Investor Information Document, the annual report and semi-annual report, if published thereafter or for moreinformation about any Franklin Templeton Investments’ fund, UK investors should contact: Franklin Templeton Investments, Telephone: 0800 305 306,Email: enquiries@franklintempleton.co.uk or write to us at the address below.Issued by Franklin Templeton Investment Management Limited (FTIML). Registered office: The Adelphi, 1-11 John Adam Street, London WC2N 6HT. FTIML is authorised andregulated in the UK by the Financial Services Authority. For Professional Investor Use Only. Not for Distribution to Retail Investors.