Much like forming an orderly queue or discussing the weather, paying and raising dividends used to be a uniquely British habit. However, over the last 10 years increasing numbers of companies across the world have recognised the importance of a total return rather than just the growth of their share price, and started to acknowledge their shareholders.
As a result, the numbers of overseas equity income funds continue to increase, providing an easy entry point into these bountiful sources of yield. Recent offerings include Henderson International Income Trust, due to launch later this month, and a 'C' share issue from JPMorgan Global Emerging Markets Income Trust, following its initial public offering last year.
More than an escape
Over the past couple of years there has been increased interest in overseas equity income funds as traditional dividend sources in the UK, such as listed banks and BP, have dried up. However there are many positive reasons to consider overseas income; it’s not just the second-best option while UK sources are in turmoil.
Portfolio diversification is essential for all investors to reduce volatility and risk, and while many are careful to do this across their wider portfolio, their sources of income have not been as diversified. Overseas exposure will give you access to companies unavailable in Britain and industry sectors not well represented on UK stock markets such as telecoms.
With an uncertain outlook for UK property companies, you could do better with some exposure to Asian real estate investment trusts (Reits), such as you might find in global equity income funds, according to Mick Gilligan, head of research at Killik & Co. Many Canadian shares, meanwhile, offer high yields including those in the oil and gas sector. Infrastructure, another high-yielding area, offers more opportunities if you look globally as you can access assets not available in the UK such as toll roads that provide steady cash flows.
Last year, 62 per cent of global equity income funds increased their payouts, in contrast to UK equity income funds, 74 per cent of which cut their payouts, according to research by independent financial adviser Dennehy Weller.
