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We believe successful, fast-growing companies often mature into dividend payers.
The recent announcement by, Chinese ecommerce giant Alibaba announced its first cash dividend policy, marking the entry into the income stock universe of one of the most successful companies in China. The portfolio managers of the JPMorgan Global Emerging Markets Income Trust (JEMI) quickly initiated a position as they had already liked Alibaba’s continued robust growth profile, strong positioning across retail segments and ongoing share buyback programme.
Alibaba is not the only higher-growth company that’s now in the portfolio. A key part of JEMI’s strategy is to build a portfolio that combines companies offering high dividend yields now, with faster-growing companies that may be the dividend payers of the future.
Balancing high growth and high income in the portfolio
About 20% of the portfolio is invested in stocks with a dividend yield of less than 3% but that are attractive because of their growth prospects, such as Tencent. This major Chinese internet company has a leading market share in mobile gaming and strong growth in social media, both of which should help drive healthy growth.
The majority of the portfolio—around 60%—targets companies with dividend yields of 3%–6% and attractive growth prospects1. Quanta, a Taiwanese technology company that assembles PCs, notebooks and servers, is a good example. The stock currently offers a 4% dividend yield while high demand for servers supports strong growth in next few years.
The remaining roughly 20% of the portfolio is invested in stocks with dividend yields greater than 6%. Sometimes a company paying a healthy dividend can offer a high dividend yield if its share price falls. That’s the case with Grupo Financiero Banorte, one of the top retail banks in Mexico. Valuations for many Mexican stocks have declined due to political uncertainty around Mexico’s new government and the incoming US government’s tariff proposals, regardless of individual company fundamentals. Banorte has a strong capital position and JEMI’s portfolio managers believe the bank can manage through the current environment.
Three key sectors with the most opportunities
JEMI’s portfolio managers consistently find the most investment opportunities in the consumer, financials and information technology (IT) sectors.
- Consumer
In addition to digital consumer-oriented companies, such as Alibaba and TenCent, the portfolio also has positions in two Chinese dairy companies. The investment team added China Mengniu Dairy, which was trading at a very attractive valuation, and believes that the company offers exposure to Chinese consumers and has a lot of potential to grow its dividend.
Walmex, the Mexican retailer, is a long-held stock in the portfolio. The team trimmed the position in 2023 when valuations were high. However, the recent sell-off in Mexican stocks is offering an opportunity to rebuild some of the position at a lower valuation.
- Financials
In financials, the portfolio has relatively high exposure to banks, with bank stocks in Korea contributing positively to JEMI’s performance through most of 2024. After visiting Korea in late 2024, JEMI’s investment team added Hana Financial to the portfolio. The bank is trading at a lower valuation than the other major banks, despite similar prospects, and the team thinks this valuation gap is likely to close.
The portfolio managers continue to see a strong opportunity in Indonesia’s banking sector, which has relatively low penetration. However, Bank Rakyat Indonesia had some near-term issues related to quality in micro-lending and in its credit scoring systems. The investment team reduced the position and added Bank Mondiri to maintain exposure to the broader opportunity in Indonesian banks.
- Technology
Technology stocks remain a core holding in the portfolio, particularly in Taiwan, which is a key enabler of infrastructure supporting artificial intelligence. With demand for high-powered semiconductors stretching into 2026, revenues for many Taiwanese semiconductor companies could be well supported for years. Taiwan’s TSMC remains JEMI’s largest position and other AI-enabling companies in the country look significantly less expensive than global peers. Korea’s Samsung and India’s Infosys are the second and third largest holdings, respectively, in the portfolio.
Opportunities in a changing macroeconomic environment
High inflation and interest rates have come down across many regions of the world, but emerging market investors begin 2025 in a more volatile global political environment. JEMI’s country positioning, including higher exposure to Mexico, Taiwan and South Africa than the benchmark MSCI Emerging Markets Index, is first and foremost an outcome of individual stock selection. Mexico is currently offering quality companies at reasonable prices, while South Africa’s macroeconomic environment is stabilising and the market offers high-quality dividend franchises. Taiwan should continue to benefit from its importance in the global technology supply chain. Even so, the resulting overweight positions in these countries are relatively small vs. history.
No matter what the global macroeconomic environment brings in 2025, JEMI’s investment team will seek to keep the portfolio fresh with new ideas that can generate higher returns than the benchmark and provide a higher dividend yield.
1 The portfolio is actively managed. Holdings, sector weights, allocations and leverage, as applicable, are subject to change at the discretion of the investment manager without notice.
The companies above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell.
Summary Risk Indicator
The risk indicator assumes you keep the product for 5 year(s). The risk of the product may be significantly higher if held for less than the recommended holding period
Investment objective
The Company aims to provide a dividend income, together with the potential for long-term capital growth from a diversified portfolio of emerging markets investments. It is free to invest in any particular market, sector or country in the global emerging markets universe and there are no fixed limits on portfolio construction. The Company has the ability to use borrowing to gear the portfolio to up to 20% of net assets where appropriate. Gearing may magnify gains or losses experienced by the Company.
Risk profile
- Exchange rate changes may cause the value of underlying overseas investments to go down as well as up.
- Investments in emerging markets may involve a higher element of risk due to political and economic instability and underdeveloped markets and systems. Shares may also be traded less frequently than those on established markets. This means that there may be difficulty in both buying and selling shares and individual share prices may be subject to short-term price fluctuations.
- This Company may invest in non-investment grade bonds which increases the capital risk and may have an adverse effect on the performance of companies which invest in them.
- External factors may cause an entire asset class to decline in value. Prices and values of all shares or all bonds and income could decline at the same time, or fluctuate in response to the performance of individual companies and general market conditions.
- This Company may utilise gearing (borrowing) which will exaggerate market movements both up and down.
- This Company may also invest in smaller companies which may increase its risk profile.
- The share price may trade at a discount to the Net Asset Value of the Company.
- The Company may invest in China A-Shares through the China-Hong Kong Stock Connect program which is subject to regulatory change, quota limitations and also operational constraints which may result in increased counterparty risk.
- As the portfolio is primarily focused on generating income, it may bear little resemblance to the composition of its benchmark.