Investments

SYZ & CO launches new Oyster high-dividend equities fund

The banking group SYZ & CO has launched Oyster Global High Dividend, a new sub-fund of its Luxembourg Ucits IV Sicav Oyster, investing in high-dividend equities around the world.

In the long term, the dividend is an important component of the total result of an investment in equities.

Oyster Global High Dividend combines quantitative and fundamental analysis, placing particular emphasis on dividend growth. Managed in-house by SYZ Asset Management, with Roberto Magnatantini as lead-manager, Oyster Global High Dividend is at the moment confined to institutional clients only, but in the near future it should be registered in a number of countries in Europe and Asia, allowing it to become accessible to retail investors.
 
Most investors and analysts neglect the dividend, even though it represents an essential portion of a share’s total return in the long term. For example, a recent survey based on data going back to 1900 in the US shows that, out of an average annual performance of +9.4 per cent, the dividend accounts for nearly half of the return. The results for other countries are similar, or even more favourable, for dividends.
 
Furthermore, dividends are much more stable and predictable than earnings, which may prove very volatile. In addition, a company paying a dividend has to make more cautious strategic choices and will find it more difficult to conceal poor results by means of “creative” accounting.
 
Historically, companies offering a high yield have in fact significantly outperformed the market in a consistent manner.

"Our experience, which has been corroborated by various historical studies, shows that very high dividend yields are rarely sustainable and that they are often symptomatic of companies facing operational problems. A more balanced approach between dividend and growth also makes it possible to obtain a better-balanced portfolio in terms of sectors, countries and stock market capitalizations, by avoiding the bias usually built into these strategies, such as overweighting of public services or telecoms,” says Magnatantini.

The approach developed for the fund is based on the following main features:

- Definition of an optimally broad investment universe, so as to avoid the trap of focusing excessively on certain industries or regions.

- Concentration on companies offering a yield of two to six per cent which allows the dividend to be reconciled with growth capacity.

- Elimination of companies whose dividend payout ratio is too high or which have cut their dividend too much in previous years.

- Elimination of companies with inadequate fundamentals (ROE, Piotroski score, etc).
 
By filtering out the companies in the universe combining these different criteria, it is possible to reduce the number of companies from 60,000 for the global index to around 600 investment candidates, which are then subjected to conventional qualitative analysis.

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