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Investing globally in equity income
The default choice for income seekers willing to take some risk with their capital has historically been UK equity income funds, which are home to some of the country’s most capable fund managers and have enjoyed significant fund flows over the past decade. An increasingly popular option, however, is to look beyond the UK and invest in global dividend-payers.
This demand has been matched by a growing supply, with companies around the world increasingly paying dividends as they strive to meet the needs of international shareholders. The past 10 years have underscored the value of tangible returns to investors, such as dividends, rather than the more nebulous charms of capital gains.
This is not just confined to developed markets – emerging market companies are increasingly implementing dividend strategies – so dividend investors previously confined to low-growth developed markets can access some of the faster global growth stories. In many cases, while the actual level of dividends may be similar, emerging market companies are generating higher dividend growth rates, which could help protect investors against inflation.
Diversification is a key advantage of looking globally for income. In the UK, income-paying companies tend to be concentrated in telecoms, oils, financials, pharmaceuticals and utilities so new markets bring in some new sectoral opportunities.
Paul Dixon FPFS
Chartered Financial Planner