Impact investment funds have become increasingly popular in recent years as more investors look to align their portfolios with their values. BMO is one of the leading providers of impact investment funds in Canada. Their impact investment fund aims to generate competitive market returns while investing in companies that address social and environmental challenges. One key factor that influences the returns of BMO’s impact investment fund is the dividend yield. As an equity fund, it pays out regular dividends from the stocks it holds.
BMO’s impact investment fund focuses on ESG principles
BMO’s impact investment fund follows environmental, social, and governance (ESG) principles in selecting investments. It avoids companies involved in areas like tobacco, weapons, gambling and fossil fuels. Instead, it targets companies focused on clean technology, healthcare, education, sustainable agriculture, diversity and environmental services. By screening investments based on ESG criteria, the fund aims to invest in progressive, high-quality companies that can deliver strong long-term returns.
Dividend payments provide steady income
As a dividend fund, BMO’s impact investment fund aims to provide investors with a steady stream of income through dividend payments. The fund invests in companies with established track records of paying dividends and the potential to grow dividends over time. The fund manager carefully selects stocks with attractive dividend yields and the capacity to maintain and increase dividend payouts. This provides investors with a reliable source of income on top of capital appreciation.
Dividend yield comparable to broad market indices
Despite its ESG focus, BMO’s impact investment fund has delivered a dividend yield comparable to broad market indices. Over the past 5 years, the fund’s dividend yield has averaged around 2.5-3.0%, similar to the yields of the S&P/TSX Composite Index and S&P 500 Index over the same period. This indicates the fund is able to provide an income stream in line with the overall market while still aligning with ESG principles.
Dividend growth in line with earnings growth
BMO’s impact fund has demonstrated an ability to grow dividends in line with the underlying earnings growth of its holdings. As the companies held in the fund increase their profits over time, many have passed a portion of those earnings back to shareholders through higher dividend payouts. The fund manager focuses on companies with the potential for steady earnings growth that can support reliable dividend increases.
Diversification limits concentration risk
The impact investment fund spreads its holdings across a wide variety of sectors and companies. This diversification limits its exposure to any single company or industry. If one holding cuts its dividend, it does not significantly drag down the overall dividend income of the fund. The diversified nature of the fund protects it from concentration risks that could lead to substantial dividend declines.
In summary, BMO’s impact investment fund aims to provide stable dividend income and growth while investing responsibly. Its dividend yield stacks up well against the broad market, while the fund’s diversification and focus on steady earners allows it to deliver a reliable and growing income stream to investors.