COVER STORY
because you ’ ll only get grief if you use it to drill ’.” Jacob de Tusch-Lec , manager of the
Artemis Global Income fund , says it is difficult to make direct comparisons , with US banks more likely to use excess cash to buy back shares than their UK peers , for example . When it comes to commodities , he says it is important to look at free cashflow as well as dividends . “ The difference between the two gives you a sense of how much cash a company is generating and how much it is reinvesting in its longterm future versus being returned to shareholders ,” the manager says . “ Glencore is on a forward dividend yield of 5 % and a free cashflow yield of 18 %, which compares with 1 % and 11 % for Freeport [ in the US ]. “ Meanwhile , BHP Billiton , which is about to move its primary listing to Australia , has a free cashflow yield of about 11 % but distributes basically all of that because it is not opening new mines or spending much on capex .” It is also worth remembering that yield is expressed as a percentage of a company ’ s share price – if the stock doubles in value , the yield will halve , even though the amount the
$ 549bn
– dividends paid by US companies in 2020
company pays out has stayed the same . In this way , the US market ’ s stellar performance over the past 15 years , when it has returned more than 2.5x the gains of the FTSE 100 , makes it look like a worse bet for income investors than it actually is . While the FTSE 100 ’ s yield of 4.2 % is much higher than the S & P 500 ’ s figure of 1.3 %, the US has paid out about five times more than the UK in dollar terms over the past five years .
Misadventure Ashby says that if the UK does have a limit on its ability to support fastgrowing companies , it lies more at the venture capital end of the market .
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