Page 1 of 2

Christine St Anne is Morningstar's online editor. In this article, Wingate Asset Management chief investment officer Chad Padowitz talks about managing a global portfolio amid the global market volatility.

Has the global market volatility influenced your view of corporate dividend growth?

Market volatility really only impacts share price movements, which are not necessarily linked to movements in corporate earnings. This is because dividend growth is dependent on underlying earnings growth and how a company allocates their capital. Therefore, volatility has little impact on dividend growth, but if market volatility is indicative of tough times ahead, we expect dividends to go down.

Companies such as multinationals and consumer staples have a high level of dividend cover, which means these companies can easily afford to pay their dividends from their earnings. We are optimistic that companies such as Unilever and Johnson and Johnson can sustain their dividend payments because their cashflow is strong.

What impact will the European sovereign crisis have on your holdings in Europe?

I don't want to sound too technical, but the key risk in Europe is non-linear. In other words, things are not going to get any worse. What the region could face is a sudden shock to the system, like what happened with the collapse of Lehman Brothers in the United States.

Europe has many of these types of risks. These risks include possible sovereign defaults or the collapse of a major bank. There could also be a real shift in politics because of the current social issues in the region. It is hard to see how these risks will play out and because of that there is significant equity market risk.

Many multinational companies based in Europe derive their earnings from other markets. In effect, they are many steps removed from Europe. The European crisis will have the biggest impact on banks and utilities, as these companies often need to refinance their debt.

Do you expect companies to be more cautious given the heightened global uncertainty?

I don't think the environment is much worse than in 2008. We expect companies to remain alert but not overly cautious. Many of the companies we follow are not investing in store growth. They are lowering their growth ambitions or re-investing through share buybacks. We expect this cautious approach to remain, as it is unlikely that we will see any real resolution over the next 12 months.