Our Approach to International Equities
Our Approach to International Equities
Our research team is tasked with finding those few special businesses that we believe can deliver the most attractive rates of long-term dividend growth for our investors. In doing this we require all the companies we hold to be able to meet the same high hurdle rate, regardless of where it is listed or what sector it happens to fall into.
This high hurdle rate has profound implications.
Firstly, it means we only own the very best companies we can find internationally: those that are the global leaders in their industries, and which have the capacity to compound their dividends at double digit rates far into the future. For a US-based investor, this means no dilution of the high-quality growth characteristics they enjoy from owning US equities. And for us it means our international businesses are highly complementary to those we own in the US.
Secondly, it means we run a highly differentiated portfolio. At the time of writing (July 2024), we have allocated the majority of capital in the portfolio to growing, dividend-paying businesses in the Healthcare and Information Technology sectors, and little to nothing in areas such as Energy, Materials, Real Estate, Telecommunications and Utilities which are the typical hunting ground of our dividend yield focused peers.
Underlying this, one of the cornerstones of our approach is that a company’s destiny is not dependent on where it is listed - what really matters is its ability to drive strong growth in sales, profit, and cashflows through profitable reinvestment. This freedom to stay true to dividend growth –wherever it may be found, means we can focus our time on getting to know those few special businesses that have the potential to drive excess long term returns for our clients.
This is doubly important since research1 shows that stock selection is even more important outside the US, with just 1.41% of companies driving more than 100% of index wealth creation between 1990-2020 (in the US, it was 2.4%). The same piece of work showed that 30% of the top wealth creating equities globally between 1990 and 2020 were listed outside the US. Ergo, you would have increased your chances of outperformance by investing in an actively managed international equity fund.
For example, consider some of the wonderful companies we have invested in as a result of broadening our horizons. Our global research approach drove us to own Dutch lithography champion ASML (10-year dividend growth of 23% p/a), innovative diabetes drug developer Novo Nordisk (10 year dividend growth of 13% p/a) and the premier luxury goods company LVMH (10 year dividend growth of 13% p/a).
This experience is why we would ask you to join hands with us and take the oath of optimism, expand your horizons, and invest with a global mindset.
1 Bessembinder, H., Chen, T. F., Choi, G., & Wei, K. C. J. (2023). Long-Term Shareholder Returns: Evidence from 64,000 Global Stocks. Financial Analysts Journal, 79(3), 33–63. https://doi.org/10.1080/0015198X.2023.2188870
Disclaimer
Dundas Global Investors is the trading name of Dundas Partners LLP. Dundas Partners LLP is authorised and regulated by the Financial Conduct Authority (FCA) in the UK, the Securities and Exchange Commission (SEC) in the USA, and the Australian Securities and Investment Commission (ASIC) in Australia. The Authorised Corporate Director for the Heriot Investment Funds is Waystone Management (UK) Limited which is also authorised and regulated by the Financial Conduct Authority.
Dundas Partners LLP provides investment management services to clients in the UK, USA, Australia, and New Zealand. In this communication Dundas Partners LLP may be referred to as DGI, Dundas or Dundas Global Investors.
This document is a financial promotion and intended for professional, eligible counterparty and institutional investors only. The information presented is for the intended recipient(s) and is not to be share or disseminated without our prior approval. This material has not been prepared for retail clients.
Investors are reminded that the price of shares and the income derived from them is not guaranteed and may go down as well as up. Past performance is not a reliable indicator of future results. This document contains information produced by Dundas and sourced from others where stated. The images used are for illustrative purposes only. The views expressed are those of Dundas and are based on current market conditions. They do not constitute investment advice or a recommendation to buy any security which has been highlighted in this material. Although this communication is based on sources of information that Dundas believes to be reliable, no guarantee is given as to its accuracy or completeness.
In relation to FCA handbook ESG 4.3, Dundas does not market these funds as a ‘sustainability product’. Use of any sustainability related terms in describing the characteristics of the strategy, or inclusion of any third-party information which measures sustainability of our portfolios are for information purposes only.
For full information on fund risks and costs and charges, please refer to the Key Investor Information Documents, Annual & Interim Reports, and the Prospectus, which are available on our website (https://www.dundasglobal.com). Recent performance information is also shown on factsheets, available on the website.