Our Approach to International Equities

We believe that where dividends grow, share prices follow.

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 Partners LLP is authorised and regulated by the UK Financial Conduct Authority, registered as an Investment Adviser with the US Securities and Exchange Commission and holds a Foreign Financial Service Providers License with The Australian Securities and Investment Commission. It operates as Dundas Global Investors and/or Dundas.

This document is for information purposes only and does not constitute a recommendation to purchase or sell any fund, security or investment. If it prompts an interest in Dundas, please contact us for detailed information on our strategies and funds. It is not a substitute for a fund’s prospectus or disclosure document. The material in this document addresses general investment matters only, not Dundas’ specific strategies. Past investment performance is not a reliable indicator of future investment performance. You should be aware of the risks associated with investments in any fund, security or investment strategy.

Although Dundas Partners LLP’s information providers, including without limitation, MSCI ESG Research LLC and its affiliates (the “ESG Parties”), obtain information (the “Information”) from sources they consider reliable, none of the ESG Parties warrants or guarantees the originality, accuracy and/or completeness, of any data herein and expressly disclaim all express or implied warranties, including those of merchantability and fitness for a particular purpose. The Information may only be used for your internal use, may not be reproduced or redisseminated in any form and may not be used as a basis for, or a component of, any financial instruments or products or indices. Further, none of the Information can in and of itself be used to determine which securities to buy or sell or when to buy or sell them. None of the ESG Parties shall have any liability for any errors or omissions in connection with any data herein, or any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

© Dundas Partners LLP 2023.

Andrew Brown
Investment Manager