I suspect we’ll look back at the last few decades and say that the single most important economic story for most earthlings wasn’t tech, or leverage or Trumpite levies but the growth in emerging market consumer economies. For a huge number of investors that means buying luxury western brands including car manufacturers. I’m not so sure. Ask anyone who’s lived a fair bit in the developing world and they’ll tell you that what really makes a difference is a nice supermarket – not some dingy street corner joint. Fresh food, lots of space, special offers. We’re simple to please, we humans.
So, on this theme one stand out statistic from Monday from MENA Capital which invests in….you guessed…the Middle East and North Africa. In a fund report they wax lyrically about Morocco and its shopping sector. One of their portfolio businesses has grown annualised earnings at a 21% per annum clip since IPO in 2008. The big story here is that the euphemistically entitled “traditional sector” still represents 83% of the total retail sector.
But here’s the killer stat for me – in Morocco retail space is still at 11sqm/inhabitant compared to 40sqm in Turkey and 200sqm in Europe. Retail may be dying in the US and the UK, but boy does it have a future in the developing world.
Another High Yield basket
Back in the developed world, our aging population can’t get enough of their high yield equities.
Last week I published one basket of global yielders from a small Oxfordshire funds team (HERE), this week I have another one – this time from the very highly regarded European equities team at Morgan Stanley – which includes the excellent Graham Secker. This team has just put out a note which reminds investors that while quality stock valuations are near peak levels (the 99th percentile of its 30Y history), High Dividend Yield trades in the 10th percentile. And there are certainly plenty of high yielders kicking around in Europe. Morgan Stanley reckons that the MSCI Europe and UK’s 12m forward dividend yields of 4% and 5% is among the highest in the DM World.
“UK’s relative dividend yield vs global equities is near a 15Y high. The gap between dividend yields and government/corporate bond yields in both Europe and the UK remains close to a record high.” But here’s the second killer stat for this blog – according to Morgan Stanley “High Dividend Yield stocks have outperformed by 13% on average with a hit ratio of 60% during prior periods when Europe has outperformed World equities”.
In the graphic below I’ve featured their high yield dividend basket And the screen:
#1 High & Secure Dividend Yield basket (MSREDIVS) – Companies with a dividend yield >4% and where Morgan Stanley analysts think the probability of a dividend cut over the next 2-3 years is very low
#2 High Dividend Yield + Growth ideas – Stocks with the best combination of high dividend yield and high DPS growth over the next 3Y
#3 Our ‘equity carry’ screen – Stocks with dividend yields significantly above their corporate credit yields