Federated Global Strategic Value Dividend Fund (C) GVDCX

Share Classes Product Type Asset Class Category
Mutual Fund Intl/Global Global
As of 06-30-2018

Highlights

  • The fund provided a 30-day SEC yield of 3.84% (A Shares at MOP) and a gross-weighted average dividend yield of 4.76% at the end of June
  • This was well ahead of the 2.41% weighted average yield provided by the MSCI World Index and the dividend yield also exceeded the 4.01% yield provided by the fund’s benchmark, the MSCI World High Dividend Yield Index
  • Nine companies increased their dividend during the quarter, with the most notable increases courtesy of NTT DoCoMO and Imperial Brands as well as Philip Morris International’s second dividend hike in the past 12 months
  • For the rolling one-year period, 45 companies within the fund raised their dividends, accounting for 52 increases overall and one special dividend
  • The outlook for the fund’s dividend growth remains positive, aided by strong organic increases from most of the fund’s holdings, a weaker U.S. dollar in the early part of the year and accretive trades executed over the course of the year

Looking Back

Performance in the global equity market was mixed in the second quarter, with international stocks underperforming their U.S. counterparts in the period. Returns across economic sectors were also mixed with Energy, Technology and Consumer Discretionary leading the market, while Financials, Telecom and Industrials posted the quarter’s weakest returns. Despite the mixed sector performance, investors’ preference for lower-yielding stocks persisted in the quarter with the broad market’s lowest-yielding quintile outperforming its highest-yielding quintile by 879 basis points. The result was a market environment that was challenging in the near term for income-focused strategies.  

Performance

Federated Global Strategic Value Dividend Fund ended the second quarter with a return of 1.32% (A Shares at NAV), while the MSCI World High Dividend Index and the MSCI World Index posted returns of -0.23% and 1.73%, respectively. With the portfolio’s investments in the dividend income-producing segments of the worldwide equity markets, which tend to have a lower beta versus the MSCI World Index, the strategy’s short-term returns are not expected to move in line with the broad market.

Performance quoted represents past performance, which is no guarantee of future results. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than what is stated. Other share classes may have experienced different returns than the share class presented. To view performance current to the most recent month-end and for after-tax returns, click on the Performance tab. Performance does not reflect the maximum 5.5% sales charge for A Shares. If included, it would reduce the performance quoted.

Click the Performance tab for standard fund performance.

Performance Contributors

  • Energy was the fund's top-performing sector in the quarter posting a return of 14.95%, driven by the rally in oil prices
  • Occidental Petroleum was the portfolio's top performer returning 29.98% in the quarter. Other notable contributors in Energy included Enbridge, BP, Exxon and Chevron, which returned 15.20%, 15.07%, 12.00% and 11.82%, respectively
  • In the Consumer Discretionary sector, Luxembourg-based satellite company SES returned 10.97% during the quarter
  • Other notable contributors to performance included Digital Realty Trust, Imperial Brands and Kraft Heinz, which returned 11.07%, 10.61% and 9.46%, respectively.

Click on the Portfolio Characteristics tab for the fund’s top 10 holdings.

Performance Detractors

  • High-yield equities continued to underperform their lower-yielding counterparts, representing a near-term headwind for income-oriented strategies. A 5.0% advance in the U.S. dollar also created a drag on returns
  • Singapore delivered the portfolio’s weakest country performance, as shares of Singapore Telecom returned -12.10% amidst rising competition in two of its core markets
  • The fund’s Financials and Consumer Staples holdings also made negative contributions to performance in the quarter, generating weighted average returns of -4.24% and -2.96%, respectively

How We Are Positioned

The last month of Q2 2018 featured a tug-of-war among various economic indicators. Remarkably strong fundamentals included surging corporate earnings, near-record confidence measures and benign inflation readings. Meanwhile, investors digested a carousel of concerns from a flattening yield curve, trade wars and political uncertainty in Europe, which brought on higher levels of volatility. But in spite of rising levels of uncertainty, both the S&P 500 and Nasdaq advanced in June. International equities, however, declined modestly as the MSCI World ex-U.S. Index posted a negative return in the period. Overseas, the trade dustup was an even darker cloud, hitting emerging as well as developed markets that do a lot of business with the U.S. and its suppliers.

While macroeconomic data points can impact share price movements in the near term, Federated Global Strategic Value Dividend Fund remains committed to its focus on the long-term drivers of total return: dividend yield and dividend growth. The fund remains concentrated in Consumer Staples, Integrated Energy, Health Care, Pharmaceuticals, Telecom Services, Utilities and high-quality Banks and Insurers. These segments contain the dividend-friendly stocks that the fund seeks, enabling the strategy to provide investors with the opportunity for a high dividend yield complemented with dividend growth. Such investments also tend to be less volatile than the broad market. Notwithstanding current market conditions, Federated Global Strategic Value Dividend Fund will remain committed to its goals of providing a high and rising income stream from high-quality business assets and will not alter its investment style based on near-term market preferences.

Update as of August 16, 2018

The unfortunate events in Italy have prompted us to exit our position in Atlantia. The bridge on the A10 is part of the Autostrade per l’Italia (ASPI) concession, which is 87%-owned by Atlantia. Although the company has said they are fully insured for any damages to the roadway and third parties, the event has caused us to reevaluate our dividend growth forecast for Atlantia.