A fully flexible way to invest
4 minute read
One of the most difficult aspects of dividend investing is evaluating the probability of whether companies will maintain their dividend, raise it or cut it. There are many ways that fund managers can do this, but here we look at a tried and tested method used by the team at Artemis, who place great emphasis on company cashflows.
Who's it for? All investors
What is the most important thing a fund manager looks for in a company? Is it profits? Is it growth? Market share? No, it’s cash flow. More specifically, it’s ‘free’ cash flow.
This is the amount of cash left over from sales after paying all its expenses. In fact, it is the amount of cash left over to either reinvest back into the business or to pay out to shareholders as dividends.
A successful company is one that uses its free cash flow wisely to grow its business, rather than squander it on takeovers and trying unsuccessfully to expand into new markets. Free cash flow is an important part of what lies at the heart of the Artemis Income Fund.
The Artemis Income Fund invests mainly in companies in the UK. The team that manages the fund spend their time scouring the market for companies with strong free cash flow. They believe that good companies can be found anywhere, and keep an open mind as to where they look for opportunities.
So, when you look at the names of companies they invest in, it is a very diverse mix of businesses, from mining companies and supermarkets to healthcare and insurance companies. Such a collection of different companies means the fund is not taking big bets in any one part of the market.
As the name of the fund suggests, its aim is to provide investors with a steady and growing income over time. This is as a result of their focus on free cash flow, which a lot of companies pay out to investors as dividends. However, the income received is not guaranteed and can fluctuate over time.
Does it work?
The Artemis Income Fund is one of the stalwarts of the UK equity income market. And it’s easy to understand why – an experienced team adhering to a simple, but successful, investment philosophy, that warrants its place on the Barclays Funds List.
However, it’s important to understand that although this approach to investing has worked in the past, there is no guarantee that it will work in the future. There are other funds on the Barclays Funds List which invest in UK shares, in addition to the Artemis Income Fund. Find out more information on these funds.
To diversify your investment, you may like to consider our own Barclays Ready-Made Investments (RMI). The RMI are just one example of a range of diversified funds which allow you to select the level of risk you are most comfortable with. These multi-asset funds invest in passive funds across a range of asset classes and regions, offering a globally diversified one-stop solution for investors. Ready-Made Investments are not the only funds that we offer and they won’t be appropriate for everyone.
Past performance of the fund and its manager are not a reliable indicator of their future performance.
We don’t offer personal investment advice so if you’re unsure you should seek that independently.
Funds are designed for the long term so you should only consider them if you can stay invested for at least five years.
These are our current opinions but the future, as ever, is uncertain and outcomes may differ.
Read the Assessment of Value report [PDF, 683KB] for funds run by Barclays.
The value of investments can fall as well as rise. You may get back less than you invest. Tax rules can change and their effects on you will depend on your individual circumstances.
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