A quality-first approach for volatile markets: JPM Equity Income FundContributor Clare Hart
With the S&P experiencing a renewed bout of volatility, we asked Clare Hart, Portfolio Manager for the JPM Equity Income Fund, to tell us why her quality-first approach to investing in value stocks provides compelling opportunities for investors looking for equity exposure, but who are wary of what’s been a bumpy ride.
Why should investors consider a high-quality approach to value investing?
Historically, a focus on high quality dividend paying companies with strong management teams has helped investors share in the stock market’s growth while reducing some of the volatility. In today’s challenging market environment, we believe that a robust dividend policy can be a good indicator of quality, which is why we seek out companies that can pay—and that have the ability to continue to pay—attractive and growing dividends.
These types of stocks, with attractive dividend yields and modest payout ratios, have historically outperformed the Russell 1000 Value Index, see chart below. Identifying stocks with a modest payout ratio is key, as these companies retain enough capital after paying dividends to invest for future growth, providing us with both a growing stream of dividends and capital appreciation potential.
We focus on quality stocks with the ability to make regular and growing dividend payouts. This combination suggests that a company will likely maintain the ability to pay compelling dividends, with the potential for future growth and appreciation.
SELECTED RISK: The price of equity securities may rise or fall because of changes in the broad market or changes in a company’s financial condition, sometimes rapidly or unpredictably. These price movements may result from factors affecting individual companies, sectors or industries selected for the Fund’s portfolio or the securities market as a whole, such as changes in economic or political conditions. Equity securities are subject to “stock market risk,” meaning that stock prices in general (or in particular, the prices of the types of securities in which a fund invests) may decline over short or extended periods of time. When the value of a Fund’s securities goes down, an investment in a Fund decreases in value.
There is no guarantee that companies that can issue dividends will declare, continue to pay or increase dividends.