\u201cThe past three years for any dividend manager have been tough,\u201d he said. \u201cIt\u2019s difficult to cling on and maintain a stable kind of payment structure compared to the returns delivered by the AI boom.\u201d<\/p>\n
That boom, largely led by the US mega-cap Magnificent Seven stock, has become a defining theme of global equity markets, with companies logging astonishing growth and returns.<\/p>\n
Performance of the Magnificent Seven vs MSCI ACWI ex USA over 3yrs<\/p>\n
![\"\"](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/11\/20251124_rhodes_mg_dividends_graph_1.png\")
<\/p>\n
Source: FE Analytics<\/p>\n
But this has also created a dilemma for income investors as they look to capture some of the upside without compromising dividend discipline.<\/p>\n
\u201cIt\u2019s just something we need to accept, embrace and take on \u2013 there\u2019s no point moaning about it,\u201d Rhodes said.<\/p>\n
While the temptation to chase growth is strong, he said careful stock selection and valuation discipline will allow income strategies to capture tech exposure without overriding their core objective.<\/p>\n
With some restrictions, it is still possible for a dividend-focused fund to own some of the Magnificent Seven.<\/p>\n
\u201cI can\u2019t own Amazon and I can\u2019t own Tesla, as they don\u2019t pay dividends,\u201d the M&G manager said. \u201cNvidia does but it offers a tiny dividend yield of 0.02%, which isn\u2019t going to get the job done.\u201d<\/p>\n
More recently, Meta has begun to offer a dividend yield of 0.36%, while Microsoft \u201chas paid dividends for a long time\u201d.<\/p>\n
M&G Global Dividend\u2019s top holdings include Microsoft at 6.7%, which has a dividend yield of 0.76%. The fund also has a 3.9% position in Meta, which now offers a dividend yield of 0.36%.<\/p>\n
Exposure to the AI surge isn\u2019t restricted to the Magnificent Seven, with Rhodes citing other investment opportunities across the value chain, such as semiconductor company ASML.<\/p>\n
\u201cAt various points over the past three or four years, ASML has sold off dramatically and offered more attractive entry points to be able to buy in at a reasonable price,\u201d Rhodes said.<\/p>\n
The company also currently offers a dividend yield of 0.74%.<\/p>\n
The US-based Broadcom, too, was highlighted by Rhodes as an attractive company which has a big role to play in the build-out of AI while still meeting the criteria of the income-focused fund, with a dividend yield of 0.68%.<\/p>\n
Meanwhile, Taiwan Semiconductor Manufacturing Company (TSMC) has long been on Rhodes\u2019 radar for its \u201cimmaculate dividend record\u201d. It features in the top holdings of the M&G fund at 4.7%.<\/p>\n
\u201cTSMC makes all Nvidia\u2019s chips, meaning there is no Nvidia without TSMC,\u201d he said.<\/p>\n
\u201cThe company has always had a big valuation discount because everyone is worried that China might invade Taiwan at some point \u2013 of course, that is a big risk for any investor to consider. But TSMC also isn\u2019t allowed to buy back shares, so all it can do is pay dividends out.\u201d<\/p>\n
Although this proves there are ways for dividend-focused funds to invest in companies exposed to high-growth themes like AI, Rhodes said it is important to stick to the fundamentals \u2013 meaning sensible valuations with consistent dividend profiles.<\/p>\n
\u201cThis is getting harder in the tech space because they are all moving up [valuation-wise],\u201d he acknowledged.<\/p>\n
Despite the ever-growing valuations, Rhodes said he does not think markets are experiencing an AI bubble.<\/p>\n
\u201cIt is very tempting for people like me \u2013 a dividend manager \u2013 to call it a bubble because it is not too much fun trying to compete against this level of performance, but I think it\u2019s important to acknowledge the power of this cycle,\u201d he said.<\/p>\n
\u201cMy definition of a bubble means there is nothing there, [while] there is clearly an AI wave coming which is real and going to have an impact.\u201d<\/p>\n
Rhodes compared today\u2019s AI surge to China\u2019s mining super-cycle of the early 2000s: long-lasting, powerful, but eventually painful when it turned.<\/p>\n
\u201cNone of us know how long this [AI] cycle is going to go but the other side will be painful with an aggressive fall in capital.\u201d<\/p>\n
As such, diversification remains important, with other companies in M&G Global Dividend\u2019s top holdings including global packaging company Amcor, methanol supplier and distributer Methanex and British multinational tobacco company Imperial Brands.<\/p>\n
These companies offer dividend yields of 6.22%, 2.10% and 4.97% respectively. \u00a0<\/p>\n
Performance of the fund vs sector over 3yrs<\/p>\n
![\"\"](\"https:\/\/www.newsbeep.com\/uk\/wp-content\/uploads\/2025\/11\/20251124_rhodes_mg_dividends_graph_2.png\")
<\/p>\n
Source: FE Analytics<\/p>\n","protected":false},"excerpt":{"rendered":"Dividend managers can have the best of both worlds, according to M&G’s Stuart Rhodes. Dividend-focused investors don\u2019t need…\n","protected":false},"author":2,"featured_media":1514,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[20],"tags":[554,733,4308,86,56,54,55],"class_list":{"0":"post-280970","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-artificial-intelligence","8":"tag-ai","9":"tag-artificial-intelligence","10":"tag-artificialintelligence","11":"tag-technology","12":"tag-uk","13":"tag-united-kingdom","14":"tag-unitedkingdom"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/280970","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/comments?post=280970"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/posts\/280970\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media\/1514"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/media?parent=280970"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/categories?post=280970"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/uk\/wp-json\/wp\/v2\/tags?post=280970"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}