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By Simon Dorricott, CFA| 2-20-2018 7:00 AM

Morningstar's Manager Check Up

REAFFIRMED RATINGS: Why Morningstar analysts positively rate JOHCM UK Equity Income, Kempen European High Dividend and Somerset Emerging Markets Dividend Growth

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Simon Dorricott: Welcome to the Morningstar Manager Check-up, covering the latest ratings updates from our fund research team.

We have a dividend yield focus this week and start with the JOHCM UK Equity Income fund which holds a Morningstar Analyst Rating of Silver. This rating is supported by the long-established management partnership of Clive Beagles and James Lowen. They have worked together for over 15 years, using a consistent investment approach which is based around detailed stock research into free cashflow generation, growth and balance sheet strength.

To be considered for this fund stocks must also offer an expected future yield above that of the FTSE All-Share benchmark. Investors should expect this product to have a bias to small- and micro-cap stocks relative to peers in the UK Equity Income category and a greater focus on valuation. These biases can lead to variability in relative performance, but over the longer-term the managers have shown their worth.

Next we move to the Kempen European High Dividend Fund, which is a pan-European product that is Silver rated. While it was only launched in 2013, it follows the same strategy as a Netherlands domiciled fund that the team has successfully managed since 2007. The investment process here is very structured, with portfolio candidates requiring a minimum yield of 2.75% and stocks being sold should their yield fall to 2.5%. There is a focus on capital discipline and a safety margin is required in terms of the valuation. This process is strictly applied by a team that is well-regarded, has a high level of experience and is dedicated to dividend strategies.

And finally we move to emerging markets, with the Somerset Emerging Markets Dividend Growth fund. Somerset Capital Management is an investment boutique that is focused on emerging markets, and, Edward Lam the manager of this fund has been at the group since 2007. He benefits from a team of three analysts who are dedicated to this strategy, while 13 other managers and analysts can provide further input.

As its name suggests this fund takes a very different approach to dividends, seeking to invest in companies that can produce a growing income stream. Such names are likely to have higher quality management teams, strong cashflows and balance sheets, and the prospect of sustainable earnings growth. Quality is a proven approach within emerging markets and has shown good longer-term returns here. The fund retains it Morningstar Analyst Rating of Bronze.   


The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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