Growing middle classes
In the last section we highlighted the problems with ageing populations and the growing demand for reliable income. But there are also some positive demographic trends.
To meet the demand for reliable income, fund managers need to identify sectors or geographical areas which can generate reliable future profits from which dividend income can be paid.
A heavy concentration of young people can provide this edge.
Growing middle classes are another vital source of future growth.
The chart at the bottom of the page highlights where tomorrow’s middle classes reside. The orange circle indicates the current size, and the purple circle vividly highlights how this will change over the next 20 years.
As you can see, the huge growth in middle classes is focussed on Asia, which also has the benefit of two very large nations with very young populations, India and Indonesia.
To give a sense of the potential, imagine the
following:
- everyone has a fridge in the UK
- 60% of Chinese enjoy fridges
- but only 18% have fridges in India
Billions of people across the emerging markets in Asia, South America, and Africa are becoming consumers for the first time - they want clothes, food and personal care products that we in the West take for granted. Yes, and fridges!
Kentucky Fried Chicken makes more money in China than in the U.S.!
Colgate-Palmolive is exploiting this potential, from shower gel to pet food. It shares its success with shareholders, having increased its dividend payout every year for the last 48 years.
Colgate-Palmolive will fit within the global equity income funds identified earlier. And don’t overlook the fund we have frequently featured, M&G Global Basics, which invests in successful first world companies growing their profits in third world countries