Global Income - opportunities abound
A number of factors are common to equity income investing wherever you are in the world:
- the bulk of stock market returns 1970-2010 have been generated by reinvestment of dividends and dividend growth
- bond yields are up around the globe, due to higher growth and inflation expectations
- a period of higher inflation is positive for equities (not for bonds)
- companies are cash rich, and in a strong position to increase dividend payouts
The weakness of focussed income funds, concentrating on either UK or Asia etc, is that they are, well, focussed. A global fund by nature has greater reach, and is more diversified.
For example, although European dividend growth is expected to be 10% in each of the next 3 years, in 2011 and 2012 expectations are for a whopping 25% growth in dividends in Latin America.
A global equity income fund can blend in these opportunities. For example, M&G Global Dividend is aggressively growing the payout. The yield 3.3%, and this payout is expected to grow by 16% in 2011.
The recently launched Artemis Global Income fund, certainly intends to exploit the choices, and makes a feature of the fact that it isn’t full of all the usual suspects.
For example, the UK exposure certainly doesn’t include the big name companies such as Vodafone and GSK. This is easier to do with a small fund, and its early performance suggests that we should pay attention - as we write, up over 16% since 1st August 2010, and outperforming key peers.
In fact it performed so well, the manager, Jacob de Tusch-Lec, was a little concerned. In our view, he needn’t be. Since last Summer the value of high yielding shares is being recognised, and this is the beginning of a new long term trend.
The expected yield is 3.9%, and this is a medium risk fund to tuck away.
(Taken from TopFunds Guide January 2011)