For this week’s episode of ETF 360, ETF Trends CEO Tom Lydon and CIO Dave Nadig spoke with Matthew Page, portfolio manager with Guinness Atkinson.
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With the most significant concerns advisors have these days being related to inflation and finding yield for clients, Lydon wants to know what sort of advice Page has to offer. For Page, it comes down to finding companies willing to pass on the inflation that they’re experiencing through price raises, along with companies that have robust balance sheets.
“The ability to weather whatever level of inflation we see, whether it’s going to be short-term transitory or whether it’s going to persist over the longer terms,” Page adds, “Means inflation isn’t necessarily a bad thing for equities if companies can maintain margins, and that will grow their profits with that inflation as well.”
Looking at Guinness Atkinson’s SmartETF’s Dividend Builder ETF (DIVS), Nadig wants to know what makes that actively-managed fund stand out. As Page explains, it’s an actively managed, highly concentrated 30-stock portfolio.
“We are looking for best-in-class dividend payers, but only that. We want companies that have been primed for dividend growth over the short, medium, and longer-term. So, I think in this environment, where people are worried about inflation that focus on dividend growth rather than just high yield can be a nice hedge towards that.”
Additionally, Guinness Atkinson owns companies worldwide, which helps to attempt to find a balance between those great domestic stocks and those best in class companies that can be found internationally.
Looking at the conversion that took Guinness from an old-fashioned mutual fund to something with a neat ETF wrapper, Page notes how being first to market on this was a great achievement. With that in mind, there’s so much money still in mutual funds, but even with the ETF wrapper, it doesn’t mean there’s a necessity to force one over the other.
As far as one example of a stock Page was willing to highlight, Taiwan Semiconductor has everything Guinness Atkinson looks for. It’s consistently delivering a high return on capital; it’s got great growth opportunities; it’s highly cash generative, which is what’s needed for that dividend. Finally, it’s investing around $30 billion this year to grow its business and expand, which is necessary if the intent is to increase one’s dividend over time.
Additionally, it works as a company that can pass on the inflation to the investor. That, in turn, becomes revenue for them, which helps offset inflation. Basically, semiconductors are an excellent area to rely on for this process.
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