Investors have fled bank shares in droves because a crisis in the sector broke out earlier this thirty day period. The collapse of Silicon Valley Financial institution and Signature Bank in the United States, as very well as the UBS rescue of Credit Suisse , uncovered cracks in what has extensive been explained by regulators as a resilient and effectively-capitalized global banking method. The SPDR S & P Regional Lender ETF (KRE ) slid 14% previous 7 days, though it has recouped some losses, up 6% so significantly week-to-day. Fund manager Ian Mortimer is not a admirer — and claimed he has in no way owned a banking inventory in any of his funds. Mortimer, who manages the dividend-focused Guinness World wide Equity Money Fund, informed CNBC Professional Talks on Wednesday , that is due to the fact the sector does not satisfy his criteria for buying dividend-yielding shares. Not all are created equivalent Not all dividend-paying corporations are developed equally, according to Mortimer. “Firms that shell out a flat dividend tend to do about the similar as the marketplace. Companies that slash their dividends about a period are inclined to underperform very considerably.” His system? Choose stocks with sustainable and rising dividends. “It is the subgroup of firms that manage to effectively pay back and mature their dividends around time that drives the outperformance in follow. That’s wherever we are trying to situation ourselves as the conventional bearer for the fund — to acquire firms that have sustainable and escalating dividends,” he included. On the other hand, Mortimer is not fond of the dividend aristocrats — a pick out team of stocks on the S & P 500 that have elevated their dividends in each and every of the previous 25 a long time at the very least. “They are a helpful tutorial, but they do not correlate that extremely with dividend advancement,” he explained of the well known investing technique. Instead, the metrics that correlate most remarkably with considerable dividend progress and dividend protection are return on money, equilibrium sheet power, and the “dimensions of the setting up dividend yr,” in accordance to Mortimer. “So that’s our starting issue: persistently better return on cash companies which are not overly leveraged. If you assume about that as your setting up stage, the huge bulk in the banking sector do not go those people standards,” he reported. Why he shuns banking companies Mortimer famous that banks tend to have a much more cyclical return on capital and have inherent leverage in just their company product. “The banking sector has been an area that normally pays quite higher dividends — form of eye-catching from that perspective. Having said that, the funds development has not always followed that,” he explained. “And the 2nd point is the kind of dividend volatility from that sector is very substantial. So, it’s a … idea that in distress, the banking sector will lessen or probably terminate their dividends,” Mortimer included. He also referred to as financial institutions “fairly opaque,” necessitating good stability sheet assessment, as opposed to other a lot more easy sectors these as consumer staples. — CNBC’s Weizhen Tan contributed to reporting