Federated Global Strategic Value Dividend Fund (IS) GVDIX

Share Classes Product Type Asset Class Category
Mutual Fund Intl/Global Global
As of 09-30-2018

Highlights

  • Federated Global Strategic Value Dividend Fund provided a 30-day SEC yield of 3.96% (A Shares at MOP) and a gross weighted average dividend yield of 4.86% at quarter end
  • This was well ahead of the 2.35% weighted average dividend yield of the MSCI World Index and the 3.84% yield of the fund’s benchmark MSCI World High Dividend Index
  • Eight portfolio holdings increased their dividends during the quarter, with the most notable courtesy of Altria, CIBC, Duke Energy and Emera
  • For the trailing 1-year period, 46 companies in the portfolio raised their dividends, accounting for 52 separate increases overall, including one special dividend from Singapore Telecom
  • Investors’ preference for lower-yielding, high-beta stocks persisted during the quarter with the broad market’s lowest-yielding quintile outperforming its highest-yielding quintile by 536 basis points

Looking Back

The divergence in equity market performance between the U.S. and most other global markets widened again in September as the broad domestic indexes rose even as shares in Europe and much of Asia sold off. Domestic larger-cap stocks outperformed smaller caps, as both the Dow and S&P 500 hit new record highs during the month before pulling back a bit but still closing up in the month. The Nasdaq and Russell 2000 both ended the month lower.

The story in the U.S. remained much the same:  outside of housing, growth remained robust, prompting the Federal Reserve (Fed) to again raise its gross domestic product forecast for this year and next. The Fed also delivered a fairly market-friendly outlook as it sees inflation continuing to hover around 2% even as growth picks up. Trade worries seemed to fade even as their impact on the economy picked up, most notably in exports where Chinese counter-tariffs caused soybean shipments to plunge.

Outside of the U.S., the macro data in Europe softened some more but was still supportive of expansion; the two key issues on the continent were the ongoing Brexit talks and the refusal of Italy’s new populist government to take steps to curtail deficit spending. Worries about emerging-market contagion eased as Turkey’s lira and most other emerging-market currencies bounced off their lows. Also, rising oil prices gave a boost to Russia, Brazil’s economy continued to turn the corner and Southeast Asian economies continued their strong performance.

Performance

For the quarter, Federated Global Strategic Value Dividend Fund A Shares returned 2.46% at net asset value, while the MSCI World High Dividend Index and the MSCI World Index posted returns of 4.79% and 4.98%, respectively.

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

  • The top-performing Financials sector generated a 10.74% return, led by French reinsurer Scor, which returned 25.06%. Other contributors in the sector included the Sweden-based banking group SEB and Canadian banks CIBC and Bank of Montreal
  • The Health Care sector provided a 8.10% return, led by Pfizer, AstraZeneca and Sanofi
  • Other notable contributors included UPS, Kimberly-Clark and Singapore Telecom

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

Performance Detractors

  • High-dividend yield equities continued to underperform their lower-yielding counterparts
  • Materials represented the portfolio’s weakest sector performance as shares of Amcor returned -4.87%
  • Additional names that detracted from performance included Vodafone Group, Kraft Heinz and Public Storage, which declined 11.61%, 11.36% and 10.27%, respectively

How We Are Positioned

Federated Global Strategic Value Dividend Fund remains concentrated in Consumer Staples, Integrated Energy, Health Care Pharmaceuticals, Telecom Services and Utilities and high-quality banks and insurers. These segments contain the dividend-friendly stocks that the fund seeks, enabling the fund to provide investors with a high dividend yield complemented with dividend growth. That dividend growth can help the fund both sustain its high yield and outpace inflation. Such investments also tend to be less volatile than the broad market, offering lower downside risk characteristics for the portfolio.