Yahoo Finance Six global income investments to beat your UK dividend addiction
The FTSE 100 has enjoyed an enormous rally, with the result that yields – the dividend income you obtain per £1 invested – have fallen.
In 2014 the index of the UK’s biggest companies yielded 4.7pc, compared to just 3.9pc today.
This is still higher than the yields in many other countries, but the real danger is that the income paid out of the UK stock market as a whole is coming from fewer, bigger firms.
For example, oil giants Royal Dutch Shell and BP collectively account for nearly 15pc of the FTSE 100 index and yield 7pc and 6.5pc respectively – two of the highest yields in the index.
Such “concentration” means investors are dangerously reliant on the fortunes of specific companies and sectors of the UK market.
The clearest example of the risk this poses comes from the banking sector in the aftermath of the financial crisis when bank dividend payments came to a sharp halt.
Anthony Gillham, a multi-asset manager at Old Mutual Global Investors, said: “Prior to 2008, banks were among the best dividend payers, but in the wake of the financial crisis investors who were relying on them for income were sorely disappointed.”
In contrast, the number of stocks paying dividends globally “has increased significantly in the past few years” said Michelle McGrade of fund shop TD Direct.
The UK remains the highest yielding major stock market, but is lagging behind in terms of growing this income.
In 2016, global dividends – not including special payments – grew by 0.6pc, according to figures from Henderson Global Investors, while UK dividends fell by 2.4pc, and are at their lowest level since 2012.
Income funds investing overseas do not always offer higher yields, but they spread risk away from the fortunes of the UK market and might be worth holding alongside popular “UK equity income” funds.
Adrian Lowcock, of investment company Architas, said: “Exposure to global income-paying stocks gives investors access to some of the world’s most consistent and reliable dividend payers.”
For instance, US-listed Coca Cola has increased its dividend each year for 55 years, and currently yields 3.5pc. There are a number of options for income investors. Telegraph Money unearths several attractive propositions.
Artemis Global Income
Yield: 2.9pc
Five-year total return: 123pc
Charge: 0.81pc
This £3.6bn fund is invested in companies spread across the US, UK, Europe, Japan and emerging markets.
Bank and financial stocks make up around a quarter of the fund, but it is invested in a broad range of sectors and manager Jacob De Tusch-Lec has no region or size restrictions.
Spanish leisure group Parques Reunidos is a top 10 holding.
Newton Global Income
Yield: 3.2pc
Five-year total return: 97pc
Charge: 0.79pc
The £5.8bn Global Income fund has large investments in consumer goods, health care, tobacco, technology and consumer services.
Nearly half the fund is invested in the US, and another 25pc in the UK.
Switzerland, the Netherlands, France, Japan, Norway and Sweden also feature in the portfolio.
Top holdings include Microsoft, Japan Tobacco and pharmaceutical company Novartis.
Fidelity Global Dividend
Yield: 2.8pc
Five-year total return: 111pc
Charge: 0.98pc
Daniel Roberts has run this £830m fund for the past five years. Strong growth has made up for the below 3pc yield.
American and UK stocks account for around 50pc of the fund, with the rest spread across countries including Japan, Germany and Australia.
Mr Lowcock said that Mr Roberts focuses on straightforward, predictable businesses – top holdings include consultancy firm Wolters Kluwer and consumer goods company Johnson & Johnson.
SPDR Global Dividend Aristocrats ETF
Yield: 3.3pc
Return: 46pc since May 2013 launch
Charge: 0.45pc
This £270m exchange traded fund features in our Telegraph 25 list of favourite funds.
It is a “smart tracker” fund, which is a tracker fund that screens companies according to various criteria.
Global Dividend Aristocrats tracks those companies that have grown dividends for at least 10 years, and have the money to continue this.
The end result is a relatively low-cost way to buy global exposure to mature, defensive companies with a solid yield.
Schroder Asian Income
Yield: 3.5pc
Five-year total return: 76pc
Charge: 0.94pc
The £1.1bn Schroder Asian Income fund invests across Hong Kong, Australia, Taiwan, China.
Top holdings include electronics company Samsung and HSBC bank.
The fund is widely held and has an excellent record.
Mr Lowcock highlighted manager Richard Sennitt’s 21 years’ experience investing in Asia.
JP Morgan Emerging Markets Income
Yield: 3.6pc
Return: 40pc since July 2012 launch
Charge: 0.93pc
This £330m fund is the most volatile of the list, but Ms McGrade said the fund could make a “good addition to a portfolio”, citing the potential of its investments in Taiwan and South Africa.
She said: “In many cases, emerging market companies have continued to pay dividends even in the tough times.”
Stocks in Taiwan, China and South Africa make up around 50pc of the portfolio, but it is spread across a variety of other emerging markets including Brazil and Mexico.
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