Another option for global income

The case for global income is growing stronger. Dividends in the UK were over-concentrated in key sectors and companies even before the financial crisis; now, with several major banks out the picture, they are even more so. The troubles that afflicted BP in 2010 illustrate the dangers of relying on too few companies for income.

Dividends in other parts of the world, including Asia and the US, are rising, in some cases quickly. The currencies in which they are paid may also appreciate, although that's not certain. Building a global equity income portfolio yourself would be a daunting task, but a good global equity income fund can do the job for you at a reasonable cost.

The choice of overseas equity income funds has increased notably over the past few years, and we've already identified M&G Global Dividend Fund as a solid option. But it's not the only one; the Invesco Perpetual fund is a worthy alternative, despite its relatively short track record.

"A global fund should provide access to companies in the sectors and assets that a home market cannot deliver directly," says Andy Parsons, head of investment research at The Share Centre. And on that score, the Invesco fund certainly does the job. The key sector exposures are consumer discretionary (20.7 per cent), healthcare (15.6 per cent), industrials (15.4 per cent) and consumer staples (11.9 per cent). By contrast, UK equity income comes predominantly from financial services, oil, utilities, tobacco and telecoms.

Geographically, the fund is notably exposed to the US, which is among the best-performing major stock markets so far in 2012. It is also a good source of dividend paying companies. "The US increasingly offers investors income diversification, a higher concentration of income opportunities and domiciled companies that are recognised for having established dividend policies," says Mr Parsons. Its biggest companies are also very international, and in many cases derive big chunks of their revenues from fast-growing emerging markets.

Read more on US equity income

Invesco Perpetual Global Equity Income does not offer the highest yield in its sector, but its managers Paul Boyne and Doug McGraw prefer companies with growing and sustainable dividends, rather than simply the highest-yielding shares. They want companies that can sustain profit margins and deliver returns through the economic cycle, and which have attractive valuations. They target high-quality companies with attractive franchises and balance sheets with a conservative level of debt.

"We believe that these types of companies are more likely to be able to return cash to investors in the form of growing dividends," they say. "Sustainability of margins and dividends are key to our approach."

The fund aims for a rising level of income together with long-term capital growth. On that score, it's doing well so far; it's among the top three performers in the Global Equity Income Fund sector over both one and three years. The lack of a longer-term track record does count against it, but Paul Boyne has 19 years of investment experience and Mr McGraw has 17 - so while the fund itself may be a new kid on the block, its managers certainly aren't. For diversified exposure to growing divdends worldwide, it looks a good option. Buy.

Source: Morningstar, *Invesco Perpetual.

Performance data as at 7 July 2012.

Top ten holdings as at 30 June 2012

Geographic breakdown