Marcus Bogdan, Portfolio Manager of the Switzer Dividend Growth Fund (Quoted Managed Fund) (the Portfolio) recently spoke to Peter Switzer on Switzer TV to discuss which stocks in the portfolio is performing well, despite the lockdown restrictions.
Watch the full interview here:
Peter Switzer (PS): Joining us now as he often does, is Marcus Bogdan, the portfolio manager of the Switzer Dividend Growth Fund. Marcus is an expert on stocks, so I always like to throw questions at him. Marcus, thanks for coming on the program.
Marcus Bogdan (MB): Good to be here. Thanks Peter.
PS: One thing you do is you search for companies that pay great dividends and there was high expectation, that particularly I think it was CBA was going to pay, even do a share buyback. Do you think the lockdowns in Sydney and Melbourne could affect the dividends that you might’ve been expecting, say three or four months ago?
MB: No, I don’t think so, on a broad perspective. If you look at the composition of the types of companies that we have in the portfolio, there is an emphasis and a cornerstone in the portfolio around quality, market leaders, whether they be defensive industrial companies like Amcor and Brambles, consumer staples, Endeavor, Wesfarmers, Coles, Woolworths, all those key healthcare companies, and finally companies like BHP – we’re seeing the strength there in iron ore prices, which has no correlation to what’s happening either in Victoria or New South Wales. So that emphasis around market leadership, around earnings resilience, gives us great confidence that these companies can navigate through these lockdowns and continue to pay good dividends.
PS: What has been the latest one that you’ve put into the portfolio, or if you’ve already mentioned them before, what is it an interesting one that you’ve got in the portfolio that a lot of people don’t realise is a good dividend payer?
MB: Sure, well the most recent addition that we’ve made has been in Endeavor, the retail drinks and hotel business, which has been spun out of Woolworths. That retail liquor business, incredibly defensive earnings, has done well through the pandemic, and we expect that that will continue.
I think an interesting one that we’ve got in the portfolio, which we’re generally more positive on, has been Medibank Private, offering a dividend yield of around 4%. There has been an improvement in this sort of the operational and the industry outlook for private health. There’s been a better uplift in participation. Medibank has increased their market share, they’re in an unquestionably strong capital position, and they’re also expanding into additional health care services that we expect will deliver a higher premium rating in the marketplace. So, defensive earnings, very attractive dividend of around 4% and gaining market share.
PS: Now I’m talking through my own pocket here because not only was I behind the creation of the Switzer Dividend Growth Fund, I also actually have my superannuation money in the fund as well. Before the crash, it peaked out at about $2.70 and we’re getting awfully close to that level again. I guess my question to you is, from what you’re seeing out there for the next year or so, do you think that the likelihood is that this fund and its unit price has the capacity to get to new highs considering that $2.70 number we saw before the crash, due to the Coronavirus?
MB: It’s a really important point that you’re making, and I think you’ve got to bring it back to investment fundamentals and what does drive the market higher is around the trajectory of earnings. The trajectory of earnings, particularly what we’re going to see in the upcoming reporting season is earnings growth of around north of 20%. That will be driven by a good uplift in the banks, particularly CBA. We’re seeing it already in the materials and companies like BHP. So that fundamentally, that earnings growth supports market valuations of where they are today.
The next iteration is looking at well, what’s going to happen in 2022? And consensus forecasts are still expecting around 10% earnings per share growth for the coming year. So again, that is supportive of both capital appreciation and earnings growth, and importantly, particularly for the dividend portfolio and uplift in dividends as well. We would expect that we will get past the pre-pandemic levels of both earnings and dividends over the next 12 months.
PS: Okay mate, I’ll keep my fingers crossed and I’ll keep monitoring on a regular basis while I drag you on the show. Thanks for coming on.
MB: You’re welcome. Thanks Peter.
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