BNY Mellon US Equity Income fund added to Wealth Shortlist

BNY Mellon US Equity Income was added to the Wealth Shortlist of funds chosen by our analysts for its long-term performance potential on 14 September 2023.

The fund aims to maximise total returns by growing both the income it pays to investors and the capital value. The fund can invest across the US market, but it tends to be invested in large companies that trade at attractive valuations and provide a balance of income today and dividend growth potential in the future. We think the fund could be a good way to add US exposure to a global portfolio or could sit alongside other more growth focused US funds.

The fund is managed by John Bailer, a seasoned investor with over 20 years of experience under his belt. He entered the industry in 1992 and has managed US income strategies since 2005. Bailer has been manager of the BNY Mellon US Equity Income Fund since launch in 2017. Bailer is supported by experienced back-up managers Brian Ferguson and Keith Howell as well as around 20 analysts at BNY Mellon.

Bailer aims to invest in companies that he believes can deliver a balance of a good income today, and dividend growth in the future. These businesses will typically have strong balance sheets and free cash flows, sustainable and well covered dividends and attractive revenue and earnings growth rates.

Bailer spends a lot of his time working with the wider analyst team at BNY Mellon as part of the idea generation process. This includes detailed analysis of companies to determine how much he believes the company’s shares are actually worth, and spotting those that he believes are undervalued. Bailer wants to invest in companies that are trading at share prices lower than he feels they are worth in the long term, possibly reflecting some short-term headwinds.

Bailer will also look at the whether the company pays a dividend to its investors and whether he believes the dividend will grow over time. Every company the fund invests in must pay a dividend at the time of purchase. This process leads to a portfolio of 30-60 companies so the fund can be quite concentrated, meaning each investment can have a big impact on performance, increasing risk. Investors should be aware that charges are taken from capital, which can increase the yield but reduces the potential for capital growth. There is also the flexibility to use derivatives which increases risk.

Given the fund’s strong valuation and quality focus, our analysis suggests it typically performs well when value stocks are in favour.

We think Bailer has built a strong track record in US income investing and has done a good job over the long term for patient investors. The fund offers something quite different to some of its peers in the IA North America sector and Bailer is well supported and resourced for the task at hand. This gives us confidence in the fund’s long-term prospects. Though as always there are no guarantees and past performance isn't a guide to the future.

The fund currently yields 2.46%. Although income is not guaranteed, and yields aren’t a reliable indicator of future income.

We’ve also published a full fund update to go alongside this notification.

Past performance is not a guide to the future. Lipper IM to 31/08/2023.

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