Thornburg Investment Income Builder is a globally oriented portfolio whose aim is to provide an attractive and growing income stream, with capital appreciation, over time. A dynamic blend of global dividend-paying stocks and bonds of virtually any type, Income Builder is broadly flexible in pursuit of its objectives.
“The portfolio’s goals are to provide interesting current income, and over the long term, to grow that income on a per-share basis. The direct consequence of success in those two is likely to be capital appreciation. Because global dividend-paying stocks are so well suited to the above goals, our portfolio has generally been, and is likely to continue to be, dominated by that asset class. Fixed income and other income-generating asset classes are also important to the portfolio. If we’re able to find companies that show both an ability and willingness to pay shareholders a significant portion of earnings, and those companies are in a position to create value over time through growth, we may find continued success.”
— Brian McMahon
Global Diversification Can Improve Yield
U.S. corporations have historically reinvested capital in businesses rather than returning it to shareholders in the form of dividends. But in overseas markets with stronger dividend-paying cultures, this tendency is reversed.
Fixed income plays a supporting role in the portfolio, aiding in income production and potentially muting volatility over time. And in the Income Builder portfolio, we don’t limit ourselves to bonds of a particular type or credit quality in the search for the best risk/reward trade-off. Bonds have ranged from under 10% today to more than 40% of fund assets.
Investors tend to focus on current yield, or current income divided by current price. While useful, current yield is only a snapshot. It can be helpful to look beyond it—to yield on cost, which is annual income divided by the cost of an initial investment—reflecting an investor’s yield on their original purchase.
If one were to invest a hypothetical $100,000 in a security with a current yield of 5% at purchase, and income grew by 50% over time, the yield on cost of the initial investment would have grown from 5% to 7.5%.