Healthcare, IT and Consumer Staples companies lead the field as expected dividends increase, Fidelity Analyst Survey reveals
- Analysts bullish about Healthcare companies
- Energy firms expected to continue to undergo severe adjustments
- Dividends expected to increase across all sectors except energy
Hong Kong, 13 April 2015– Healthcare has emerged as a leading investment sector as a combination of an ageing population and increased innovation boosts prospects for healthcare companies, the 2015 Fidelity Worldwide Investment survey has revealed.
The Fidelity Analyst Survey is the culmination of an average of 17,000 meetings held each year between the company’s 159 equity and fixed income analysts and corporate decision-maker. It monitors views on issues such as confidence levels, capital expenditure, balance sheet strength and dividend payouts.
Healthcare achieved the highest sentiment, with 60 per cent of healthcare analysts reporting increased management confidence among healthcare companies, and the same proportion expecting rising returns on capital. Half of Fidelity’s global analysts also anticipate increased dividend payouts in the sector.
“The positive prospects for the global healthcare sector are primarily based on scientific progress in medicine and research, such as innovation in the areas of oncology, immunotherapy and gene therapy. Population growth in emerging markets and ageing societies in developed markets means that the healthcare boom is set to continue,” said Leon Tucker, Head of Equity Research, Asia Pacific at Fidelity Worldwide Investment.
Fidelity’s analysts are bullish about information technology companies, with more than 90 per cent viewing management confidence as being either stable or rising.
“The positive sentiment is supported by growth prospects, with IT the only sector in which the majority of analysts think their companies are at an expansionary stage in the industrial cycle, while the majority of CEOs see market/end-demand growth leading earnings growth,” Mr Tucker added.
Fidelity analysts also believe consumer companies are poised to perform well.
“These firms have healthy balance sheets and almost half of our analysts expect improving returns on capital in the sector. As a major beneficiary of the plunge in oil prices, consumer staples companies will continue to enjoy the reduced logistic costs across their supply chain. The underlying growth in earnings is expected to feed through to higher dividends,” explained Mr Tucker.
A large majority of analysts also believe utility companies now have healthier balance sheetsfollowing large-scale asset sales.
“In a notable break with the past, these firms are no longer financing dividends through debt, but are paying them out of cash,” he said.
Unsurprisingly, the outlook for energy companies is very different as the sector reels from the lower oil price.
“The energy sector is likely to see a significant decline in payouts as operating margins and profits come under severe pressure. Around 85 per cent of energy analysts reported deterioration in management confidence, and all energy analysts predict a reduction in capital expenditure in this sector. In addition, 92 per cent of analysts expect a decline in returns on capital,” Mr Tucker explained.
The number of analysts reporting expected dividend increases is highest in healthcare, followed by consumer staples and utilities. The only sector likely to see a significant decline in payouts is energy.
“One of the most positive findings of the survey is the strength of dividend expectations across the board: less than 10 per cent overall expect dividends to be cut or scrapped as companies try to avoid the negative signals such actions send,” Mr Tucker said. “Three out of four analysts expect higher dividends from companies in Japan. Almost 50 per cent also predict rising payouts in their sectors in the US, and in Europe a third of analysts see their companies increasing dividends.”
About Fidelity Worldwide Investment
Fidelity Worldwide Investment is an asset manager serving investors in 25 countries across Asia-Pacific, Europe, and Latin America. With USD $275 billion assets under management (AuM) and around 7,000 employees, we are one of the world's largest providers of investment strategies across asset classes, and retirement solutions. Investment is our only business, and our mission is to enable our clients to achieve their financial goals through outstanding investment solutions and service. (Data as at 31 December 2014)
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