29 January 2026 (pre-recorded 15 January 2026)
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[INTRODUCTION]
Staci West (SW): Welcome back to the Investing on the go podcast brought to you by FundCalibre. Dividend investing is often misunderstood as a trade-off between income and growth. In this episode, we explore how a disciplined global approach can deliver rising income over time, the balance between yield and growth, and how valuation, inflation, and market cycles shape long-term dividend outcomes.
James Yardley (JY): I’m James Yardley and today I’m joined by Stuart Rhodes, the fund manager of the M&G Global Dividend fund. Stuart, thank you very much for joining us today.
Stuart Rhodes (SR): No problem. Happy to be here.
[INTERVIEW]
JY: Let’s start with the fund itself. So the fund aims to grow its income every year. What are the key characteristics you look for in companies which can deliver sustainable dividend growth?
SR: Yeah, so you know, really the focus is on that last word is growth. And that’s especially relevant for kind of dividend investing because when many people think about dividends, they often think about you know, businesses that are very well established, maybe have gone X growth and therefore actually dividends is the only thing left for them to do. And so therefore you might get a high dividend but it doesn’t, not able to grow particularly quickly.
This fund is kind of the opposite of that really, we’re looking for companies that still have lots of growth ahead of them. They’re just achieving that in a very sensible and disciplined fashion. So we are looking for companies that are generating enough cash flow where they can pay you a sensible dividend over time, but then they’re reinvesting the remainder to help grow the business and continue to grow their cashflow streams. So therefore you can get a bigger and bigger dividend over time.
JY: And how important is dividend growth versus the headline yield in today’s market and, where is the sweet spot for you in terms of dividends? I mean, do you ignore the kind of big kind of 5%, 6% yields you might get maybe from utilities completely, or, I mean, and how will you buy something with, you know, a 1% yield, but very good growth prospects?
SR: Yeah, it’s about getting the right balance there. So, I think it’s actually changed a little bit in the history of running this fund. So I’ve been running this fund for, you know, 17, 18 years. And, you know, when we first started, I would’ve had quite a clear answer to that question where the vast majority of the fund was in the kind of three to 3.5% dividend yield and growing that dividend, 7%, 8% per annum. And that was kind of what I would describe as a standard holding within the fund. And almost like a bell shaped curved around that and where we’d have two tails of higher dividends and maybe less growth and lower dividends and higher growth. But what’s actually happened really kind of in the last seven, eight years when we’ve seen kind of the market behave in the manner it’s done is that we’ve got more choice at either end of the spectrum there.
So we’ve been able to find some companies that are yielding a bit more are in the 4% to 5% category and are still able to grow. And the kind of minimum growth rate we need is kind of 5% because we believe in most time periods of 5% dividend growth will be enough to see off inflation. So if we can get, you know, a 5% dividend yield growing at 5% per annum, then that is, you know, worthy of consideration. And then likewise, we’ve got some businesses that are maybe only yielding 1% or 2%, but growing their dividend up at 15 and in some cases well north of 15%. And so, you know, that that normal kind of bell shaped curve distribution of yield across the portfolio has flattened out a bit.
And we’ve had I guess more of a range of choice, but it’s still always get about getting that balance right in making sure that there is some yield to start with. And if it is slightly lower than it is compounding really at a rate that is enough to let it catch up in the out years. And then if we are moving to more traditional yields of three to maybe, let’s say five, then we are still getting growth rates that should be enough more than enough to see off kind of inflation. So that’s probably a quick tour of the kind of what the portfolio looks like in terms of spread of yield and dividend growth that we expect.
JY: And you are a global fund, so I mean, you have a very large investible universe. So I mean, are there any sectors or geographic regions where you’re currently seeing the most attractive dividend growth opportunities?
SR: I think it’s generally sort of quite an interesting question really because it’s one we get quite a lot in terms of which geographies, specifically on the geographies actually, which geographies look more attractive. And you can look at kind of, you know, headline valuations at that geography level. And you know, optically you can say that, you know, maybe this particular regional country looks cheaper than others, but actually when you really look through it and compare like for like, we don’t see what I would describe as dramatic differences of valuation across the globe. You know, from time to time there might be some, you know, small interesting opportunities where you get, you know, the chance to maybe go down two or three multiple points at a PE level across this sector in Europe, for example, versus the US but actually you know, at this particular moment in time, I wouldn’t say that we are seeing compelling geographic opportunities emerge.
The big question we get a lot is obviously in the US is the US expensive, but if the US is so big, there’s so many companies in terms of, you know, debt liquidity, that that actually, when you take out the high net, the kind of headline grabbers that we all kind of read about all the time, and actually you go into kind of, you know, the more mid-cap area which for the US is still very big in investible companies, we’re actually starting to see some valuations that look very comparable and compete with what you can get in the rest of the world. And especially given what happened in 2025 when the outperformance of the rest of the world versus the US was as significant as it was, we’ve seen, you know, that disparity or what people have come to describe as an expensive US valuation, you know, we don’t think that’s necessarily true. Now, certainly when you get into kind of the more mid cap companies and remove the headline grab large technology businesses from a…
JY: I was just gonna say, and is that because those are just better companies in the US and they’ve got better growth, so even if they’re a bit more expensive, they’re worth it. I mean, it’s interesting that, because obviously we hear a lot from say, I dunno, UK managers or Asian managers who might say, look, we’re so much cheaper than the US but you don’t buy that argument.
SR: Yeah, no, I think when you do genuine cross compares, I mean you can always find examples where that is the case, but you know, let’s just look at some examples within the UK for example, you know, the very high-end quality businesses, something like a compass or you look at some of the other consumer staples names and then you cross compare them with what you can get in Europe and the US. And in some cases they trade at valuation. So, I’m not sure it’s as quite as simple as that all the time. I think there are you know, I think there are just generally some opportunities you have to look at each individual opportunities relative to the growth it provides in all regions. And, I think there are some good opportunities in most parts of the world at this particular moment in time. I wouldn’t say that we are constantly being drawn to one geography or one region because it stands out versus everything else.
JR: And inflation has been quite a big theme the last few years. How well positioned is the fund to kind of grow its dividend and protect investors’ real income?
SR: Yeah, so in, I mean, inflation kind of reared its head in, well it was starting to become clear in 2021, but really kind of the market started taking very seriously in 2022. And that was kind of a nasty shock where we got inflation rates that would, you know, if they sustained at those kind of periods would be really quite challenging for us to deliver, you know, real dividend growth. If I think about my comments earlier around making sure we’re 5% dividend growth or above, you know, in most time periods that sees off inflation quite nicely, but there was a kind of 18 month period there where that wouldn’t be the case. So we’re, I guess, you know, thankful and grateful that the central banks have done their job and got that kind of rate down to a much more manageable level.
But I think it’s clearly much more of a relevant topic now today and going forward than it was, you know, for 10 years or so post, post the the GFC. So, I think it was kind of almost a non-issue back then, whereas now I think you do have to, you know, to take it into your account when you’re starting thinking about valuations. And we certainly take it very seriously when we’re aiming to provide a dividend growth rate at the fund level and making sure that our dividend growth rate, there is a healthy gap between what we would see as the, you know, that comfortably 2%, 3% inflation, that that is, that looks as though it’s, it’s here to stay for a little bit.
JY: And the fund is meaningfully underweight mega cap technology versus the index. I guess that’s probably not surprising for an income strategy. I mean, how have you found that as a manager managing that? I mean is it difficult? I mean, do you have any thoughts on where mega cap tech is trading at the moment? Do you think it’s fairly valued or do you I mean you do of course have some names in that space. I mean, I think you have Qualcomm, Microsoft, and Broadcom but what are your overall thoughts for it from a kind of income investor’s perspective?
SR: Yeah, so technology, I mean, let’s just be upfront about it. Technology is a challenge for any kind of dividend investor in the market as it exists today, purely because of the sheer scale of the sector and what it makes up of the index means. It’s a challenge. However, I would say underneath that, if you actually look within technology, there are many, many options of where to invest from a dividend point of view.
So it’s not like the entire sector doesn’t pay dividends. That’s not true there are many companies and many sub-sectors within technology that actually have some really quite good dividend track records and you can see that the dividend is, you know, very much a serious commitment to the board level and the dividend growth rates in many cases have been absolutely fantastic.
So, the choice is definitely there and has been gradually improving over time. So, you know, whilst I would like it always to be a bit better, it’s definitely moving in the right direction. I think in 2024, I think it was quite a big deal when Meta started paying dividends for the first time, Google started paying dividends for the first time, salesforce.com started paying dividends for the first time. That those are all quite landmark moments for dividend investors because it demonstrates that even these companies are starting to move this way and become viable options for the portfolio as long as valuations remain attractive. And that’s the kind of the key question and the key point for any dividend investor when it comes to technology is can you buy these companies at the right price?
And you know, that’s I think the main challenge if we think, you know, far forward to today, it’s, you know, that’s probably the main barrier here is actually just being comfortable with the levels we’re being asked to pay for some of these businesses. You know, it wasn’t that long ago in 2022 where technology had a very, very difficult year. And that’s the time when a dividend manager can make a real difference is that if you have done your homework ahead of time, you’ve identified all the dividend options you’ve got within technology, you know, generally, and if you are brave enough to go against the grain and buy when no one else wants to, that’s the difference you can make as a dividend investor by going to an excellent dividend sector where you can find these businesses that grow their dividend in some cases at 10, 15% per annum, you just need to wait patiently for that opportunity and got really the entire year to do it in 2022.
And then subsequently, obviously the sector’s had a big run since then, and valuations are clearly much higher than they were then. But every now and again, you get these wobbles where you do get chances to do something about it. And obviously last year in 2025 you had the tariff wobble in April, which, you know, if you go back and look at the price charts, you’ll see that there were several of the dividend payers within technology that fell really quite sharply during that period and reached valuation levels that were competitive with what we were paying elsewhere on the fund. And so I think it’s just being open-minded and prepared to be able to move into that sector when you get the chance to do so. And then clearly just be disciplined about not paying too much when clearly, you know, the market’s very excited and exuberant about the prospects. So it’s, you know, it’s kind of classic investing really is just making sure you’ve prepared yourself to buy low and sell high
JY: And do currency movements factor into your thinking. I mean there’s been quite a lot of talk recently about, you know a weakening of the dollar and you’ve obviously got significant exposure to the US and I guess from the sterling investors’ perspective, the returns perhaps weren’t quite as good last year I think from the us. Is that something you’ve been putting any thought into or is it really just all about the quality of the companies and things?
SR: It is something we think about quite a lot, but more from a mitigation perspective. So really what we don’t want to be doing is at the end of every year explaining performance because of currency. That’s kind of the aim is we’re trying to avoid that. So we don’t want to have a good or a bad year because of currency movements.
I would say it does play quite a big role in how we construct the portfolio, but again, to try and minimise its impact as much as we can. And you get a lot of natural hedging if you are generally exposed to global businesses, which on the whole, I’d say we have a wouldn’t say an enormous bias, but a slight bias towards and so therefore on the whole, I think we do achieve that reasonably well is that, you know, our relative performance versus the benchmark, it doesn’t tend to be really driven by big geographic and therefore for big currency exposures where it it plays probably a slightly bigger role is on actually the income generation side.
So if I think about the income objectives of the fund, you know, we’re obviously, trying to pay our clients a larger dividend every year. And if sterling has, you know, an extremely strong period, most of the dividends we are receiving from the companies that we invest in are in different currencies to sterling. So that creates a headwind for what the growth rate will be if we get that kind of environment. But it would really have to be very, very extreme for us to be, you know, worried about not being able to do that.
So again, if I think back to, you know, the year we’ve just finished here in 2025, you know, the dollar was pretty weak versus most currencies certainly was weak versus the sterling. And yet we are gonna finish this fiscal year in a pretty healthy perspective from the dividend growth of the fund, the fund’s gonna gross dividend quite handsomely this year. So, you know, it’s not like it’s something we can’t overcome.I think we’d have to see sterling strengthen against most currencies by a very significant amount before it would be something we would flag that, you know, maybe that’s going to make growing the dividend sterling this year more challenging. I think despite the fact that that’s happened in 2025, it’s still a long way from being something that is gonna derail what we’re trying to do.
JY: And what are the biggest risks you are thinking about at the moment as we look ahead, particularly from the income perspective as well?
SR: So yeah, if I take the latter part of that question first. So income perspective, I mean actually we are feeling quite good about it in terms of the income generation of the fund, I kind of just highlighted I do expect this year to be a pretty strong and robust year and then we’re feeling pretty good about the next year too, in terms of what we can see and the visibility we have.
JY: And how do you think the dividend growth over the next couple of years will compare to the historic dividend growth in the fund?
SR: Yeah, so the long term CAGR of the fund up until the last complete fiscal year was just over 7%. And I’m pretty confident you know, this year and then next year we’ll probably deliver numbers in aggregate that we’ll be slightly superior to that. So, so feel like, we’re heading in the right direction from that point of view. And, probably one of the major dynamics that’s causing that confidence to come through a little bit is that we have seen kind of the quality part of the market sell off quite significantly. So the performance of quality as a concept has been pretty bad now for probably about three years. So it really started in 2023 and then, you know, continued 2024 and 2025 as well. So, so we’ve had three kind of years compounded together where quality investing as a style has been hard work.
And we would argue that quite a lot of that was from unrealistic starting valuations. And so what we’ve seen is those valuations come down and that’s what’s making us a bit more interested is in fact, we do think there are companies out there where nothing’s really changed that much. They’re delivering on the promises that they’ve kind of consistently set out. But what’s changed is that valuation expectations have just become much more reasonable. And therefore every time we get an opportunity to buy into one of those names when when the valuations fallen far enough, we’re kind of securing more income from the safe from a safety perspective. because those businesses quite rarely get themselves into difficulty where they’re not able to pay their dividends or not able to grow their dividends. These businesses tend to be the most reliable from that perspective. So every time we see the fund sort of gradually shift shift towards them, that actually actually makes me feel quite a bit better about what the dividend prospects at the fund level are gonna be for the next couple of years. So that’s definitely a dynamic that’s started.
JY: That’s very interesting. I mean, is that in the sort of staples names, healthcare names?
SR: Yeah, so those two sectors generally have been quite big contributors to what most people would describe as quality, but that they’re not on their own. For example, really recently, if we think, you know, in the early part of 2026, we’ve only been going a couple of weeks, but you know, software as a sub-sector has been pretty grim as well. So there are kind of what we would describe as businesses that are perceived to be generally quite robust where you are just paying a different kind of valuation multiple than we’ve been used to for the last two or three years. And, so we’ve been doing a lot of work trying to make sure is is that the only thing that’s changed or is the business declining, et cetera, et cetera.
And, for example, in consumer staples that’s been quite difficult. Consumer staples as a sector has been awful. You know, the valuations have come back a long way, you know, the price under performance has been really quite significant. But when you actually start to go into the detail and look at these businesses, there’s quite a lot not to like, you know, the, it’s it’s not like the market’s just being irrational. There’s actually quite a lot of negative news there as well. So, it’s taking some time to sift through the kind of wreckage there and try and make sure that you are selecting the business where the thing that’s changed the most is valuation and actually the growth algorithm underneath that you are getting exposure to hasn’t changed that much.
And I’d say in [consumer] staples, that’s definitely the sector where that’s been the hardest challenge actually is to make sure that if you are investing, you’re not investing in kind of a classic value trap where the market’s kind of right and you know, it was trading an unrealistic valuation three, four years ago and you know, the market’s been dead right in terms of de-rating it and, and bringing it back down to a much more reasonable multiple.
You know, we wanna make sure that if the names that we are looking at that have done that are still growing at the rates that we’ve been used to for years and actually quite a few businesses have kind of failed on that metric. We’ve probably done a lot of work in [consumer] staples over the last year or so and have said no much more than we’ve said yes in terms of the candidates that have been presented to us. So yeah, it has been quite hard work and you know, the quality weight within the fund has moved up, but it hasn’t moved up dramatically. And I think what I’ve just described is the reason why it’s only moved up a few percentage points and I think if this continues, it will continue to move up, but it’s not kind of maybe the dramatic move that you would expect given the scale of underperformance that’s happened from quality of the last three years.
JY: That’s really interesting. And then just finally, I mean is there anything else you are really excited about going into 2026?
SR: I mean I’m not sure if excited is the right word in terms of obviously what’s going on within technology is pretty interesting. And the scale of the impact of the CapEx that’s going on there is now in the realms of a level that not many people can understand and are used to. [JY: Yeah.] So we are looking at something really quite new and therefore, you know, I do think discipline at some point is going to be very important and you are gonna be rewarded in the medium term to for showing discipline in a period that has all the hallmarks of getting quite exuberant. So in a funny sort of way that feels quite exciting because that humbly I think plays into my wheelhouse a little bit is that we do put valuation, you know, quite high up on our priority list and it plays a central role in terms of how we think about allocating money across the portfolio.
And at some point I think that’s gonna be rewarded and especially rewarded more in the US I think, you know, value in Europe and Asia has been really doing quite well for a sustained period of time now, whereas in the US it’s been a bit more fleeting. And given the US is such a big part of the global index, I think this is going to be, you know, an interesting phenomenon to watch is that how long can these names continue to drive the index and at what point that that broadening out’s going to exist. And we have some seen, seen some signs of it in the back end of 2025 and you know, I think that will have quite big ramifications for performance generally across a lot of funds, you know, quite frankly. And so, you know, it sounds strange for me to say I’m getting excited about the potential for discipline to be rewarded, but you know, that’s kind of what we do on this fund.
JY: Fantastic. Well that’s a good place to leave it. So thank you very much for joining us here. That’s been really great.
SR: Good. You’re very welcome. Thanks for having me.
SW: This is a global equity fund with a total return approach, combining income and capital growth. The fund offers welcome diversification for those investors concerned that they are over-reliant on UK companies for their dividend yield. Additionally, the portfolio is constructed in such a manner as to cope with all market conditions. For more information on the M&G Global Dividend fund please visit fundcalibre.com
