In a challenging investment environment marked by unprecedented events like the pandemic and market volatility, Blake Hutchins emphasizes the importance of a deliberate investment strategy based on investing in quality businesses with a focus on total return and sustainable income growth. By being deliberate and optimistic, Hutchins navigates market challenges by staying true to the plan of investing in resilient businesses, even amid share price fluctuations.
Adapting to Shifting Investment Dynamics
With higher interest rates and changing investment dynamics, Hutchins discusses the shift towards a focus on income and dividend growth in the equity investment landscape. Emphasizing the importance of sustainable income generation and capital growth, he highlights the need to balance high-quality dividend-paying stocks against alternative investment options like bonds.
Striking a Balance for Dividend Growth
Hutchins outlines the significance of maintaining a balance between dividend yield and growth within the portfolio. By targeting stocks with dividend yields in the range of 2% to 4% and potential dividend growth of 4% to 9%, he aims to achieve high single-digit or double-digit total returns. This approach focuses on sustainable dividend growth and total return to enhance long-term portfolio performance.
Resilience in Face of Market Challenges
Amid considerations of persistent inflation and economic uncertainties, Hutchins underscores the importance of investing in companies with pricing power and defensive characteristics. By focusing on businesses with strong fundamentals, cash flow generation, and resilient operations, he aims to ensure continued profit growth, dividend stability, and sustained performance in a challenging economic environment.
Blake Hutchins manages the Trojan Income Fund and is co-manager of the Troy Income & Growth Trust. We discuss the changing investment environment, why it could be good for high-quality, dividend-paying companies, and where Blake is finding value in the UK market today.
Show notes: [1:16] Being deliberate and patient during tough times [3:30] Equity income investing in a different environment [6:50] Striking the right balance between yield and dividend growth [9:38] Why Blake doesn’t invest in banks and commodity businesses [13:31] The power of incumbency [16:27] The impact of higher inflation [18:33] UK equity valuations [21:30] UK domestic exposure [23:58] How the portfolio has evolved [25:39] The attractiveness of UK-listed consumer staples companies [27:34] Dividends are on a more stable footing following the pandemic [30:31] Growing the dividend in a resilient and consistent way
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