The ‘dullness dividend’: why a lack of excitement has paid off for investors during 2022

Sometimes it pays to be boring, if analysis by RBC Brewin Dolphin – the wealth manager – of the world’s top 100 companies is anything to go by.

RBC Brewin Dolphin found that the least volatile 20 stocks on the S&P Global 100 have outperformed the wider index by +13.16%, between the start of the year and the end of October.

Meanwhile, the most volatile stocks underperformed their peers by -10.36% during the same period. Volatility is measured by how much and how quickly individual stocks have moved over a given period of time.

The least volatile also happen to be dominated by sectors known for their lack of excitement: consumer staples companies, such as Proctor & Gamble; pharmaceuticals groups, like GlaxoSmithKline; and utilities, such as National Grid made up the vast majority of the list. Orange, the French telecommunications group, saw its share price move least of any company, but outperformed the index by +16.25%.

Among the most volatile stocks have been car manufacturers – Ford has been the most volatile this year on the index – while banks were also well represented, with a six among the top 20 most volatile.

However, high volatility has not always meant poor performance – and vice-versa. BP outperformed the index by +51.29% placing it in the top five stocks on the S&P Global 100 this year, but was also the 19^th most volatile.

Rob Burgeman, senior investment manager at RBC Brewin Dolphin, said: “Sometimes excitement is overrated when it comes to investment – just ask shareholders in Made.com, who have seen their shares collapse 99%. As the old fable of the tortoise and the hare shows us, it is not always about speed. Stamina and determination also win the race and this has some valuable lessons for us as investors.

“Steady earnings, regular cashflow, and rising dividends might sound like membership criteria for the Anti-Growth Coalition, but they offer investors greater security and certainty. What kinds of companies fit these criteria? Staple providers like Johnson & Johnson are a great example. Johnson & Johnson’s activities span consumer products, pharmaceuticals and medical devices, providing a good degree of diversification. The shares yield around 2.6% too, which definitely makes this a ‘no more tears’ product.

“Another good example is PepsiCo. While the company makes its eponymous soft drink, it is also involved in the snacks market both for the at home and the dine-out consumer. They are very well run with a focus on cost control and returning capital to shareholders, with the shares yielding 2.56%.

“Swiss giant Nestle is another consumer-focussed giant, with food and beverage operations. The spectacular success of its Nespresso brand shows that this is a company which, despite its age and size, is still capable of product innovation. The shares also yield 2.59%.

“However, the example of BP demonstrates that volatility is not always tantamount to poor returns. Companies in cyclical sectors – like oil – or operating in areas of the economy prone to political intervention may see heightened volatility, but it does not make them bad businesses by any measure. It is a case of accepting increased uncertainty if you choose to participate in these sectors.

“The iShares Edge World Minimum Volatility ETF focusses on companies which, as its name suggests, have a lower volatility than the general market. In times of boom, these tend to underperform, as the shiny lights of the latest fad attracts investors looking for a quick buck. All of this underlines the importance of a well-diversified set of investments, taking in a broad spread of assets that will perform at different times.”

Most and least volatile S&P 100 stocks, performance relative to the S&P 100 year to date

Source: Bloomberg, 28/10/2022

Source: Bloomberg, 28/10/2022

Disclaimers

The value of investments can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Performance is quoted before charges which will reduce illustrated performance. Investment values may increase or decrease as a result of currency fluctuations. Information is provided only as an example and is not a recommendation to pursue a particular strategy. We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness.

-ENDS-

NOTES TO EDITORS

Rob Burgeman, and his fellow investment managers, at RBC Brewin Dolphin put together bespoke investment portfolios for clients based on their long-term objectives and their attitude to risk. The portfolios will have a mixture of hand-picked holdings in them including third party funds and individual stocks that are researched and recommended by RBC Brewin Dolphin’s in-house research team.

PRESS INFORMATION

For further information, please contact:

Peter McFarlane peter.mcfarlane@framecreates.co.uk / Tel: 07412 739 093
Richard Janes richard.janes@brewin.co.uk / Tel: +44 (0) 20 3201 3343

About RBC Brewin Dolphin

RBC Brewin Dolphin is one of the UK and Ireland’s leading wealth managers and traces its origins back to 1762. With £51.7* billion in assets under management, we offer award-winning, personalised wealth management services from bespoke, discretionary investment management to retirement planning and tax-efficient investing.

Our qualified investment managers and financial planners are based in 33 offices across the UK, Jersey and Republic of Ireland. They are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.

As part of Royal Bank of Canada (RBC), we are now able to draw on the strength of a global financial institution to continue to improve the service we provide to our clients and drive further innovation across our business.

*as at 30th June 2022.

Disclaimers

The value of investments can fall and you may get back less than you invested. RBC Brewin Dolphin is a trading name of Brewin Dolphin Limited. Brewin Dolphin Limited is authorised and regulated by the Financial Conduct Authority (Financial Services Register reference number 124444).