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Global Equity Income Portfolio: May 2024

Global equity markets rose in May. Overall, the FTSE All World High Dividend Index gained 2.9% while the Ashburton Global Equity Income Model Portfolio (USD) returned 2.3%. Outperforming stocks held during the month included Imperial Brands (9.2%), VW (9.1%) and Diversified Energy (8.3%).

Delivering strong operational results, Imperial Brands’ results were broadly in line with expectations. Bullish sentiment saw VW shares rally somewhat, before declining after month end as shares began to trade without their large dividend attached. Year-on-year declines in earnings for Diversified Energy, due to lower natural gas prices, we believe to be more than offset by the substantial, and in our view sustainable, dividend yield offered by the shares of close to 8%.

Equity issuance from National Grid resulted in disappointing share price performance of  negative 7.7% during the month, though on the positive side this ought to add to the regulated asset base and help drive returns on capital in the longer term.

Justification of short-term market movements, as discussed last month, is a fool’s errand. Indicators in the long term remain generally positive for equites with companies generating aggregate earnings growth, liquidity remaining buoyant, and valuations not being overly stretched. Many elections will occur globally this year and while technically they are independent, central banks historically appear to have supported liquidity in election years. More cautiously, thinking longer term, equity market corrections have often historically been foreshadowed by high bond yields and low equity risk premia. Yields of bonds continue to be somewhat at odds with the earnings yields of equities, though this is not currently at levels to cause great concern.


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