Amgen Out, Rio Tinto In As Morgan Stanley Shuffles Dividend Deck

Industry giant Morgan Stanley MS is shaking up its model for income-focused investors, indicating a strategic move towards robust and resilient players. The multinational investment bank told investors Thursday that it added new positions and adjusted weights in its dividend portfolio.

What Happened: Morgan Stanley introduced two new names: mining conglomerate Rio Tinto plc ADR Common Stock RIO and medical technology business Smith & Nephew plc SNN, while it rung the register on Amgen, Inc AMGN and the iShares MSCI Hong Kong ETF EWH.

Strategist Kevin Demers explained Rio Tinto’s addition was driven by three factors: China’s likely announcement of a stimulus that could bolster commodity demand, Rio Tinto’s best-in-class balance sheet and underappreciated earnings power, and the company’s attractive valuation with a current spot free-cash-flow yield of 9%, according to Seeking Alpha, which originally covered the portfolio changes.

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Smith & Nephew's inclusion is also a result of three main factors: its potential for self-help, recovery of elective procedure volume in the medical sector, and its attractive valuation.

Morgan Stanley’s decision to drop EWH is strategic, opting for Rio Tinto, a company with significant exposure to China. The change could bring potential benefits from any easing by the Chinese government aimed to stimulate the economy, and consequently, a rebound in global economic growth.

Morgan Stanley removed Amgen, citing it could no longer provide a rating on the stock.

The investment bank is increasing weights in TotalEnergies SE TTE and the WisdomTree Emerging Markets High Dividend Fund DEM, while reducing its weight in Novartis AG NVS.

The portfolio’s new composition suggests a focus on companies with strong balance sheets, resilience during challenging economic periods, and exposure to regions with potential for economic rebound and growth.

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