Get attractive European yields with BlackRock

With around 57 per cent of the total UK dividend pot coming from just 15 companies in the last fiscal year, UK equity income funds have a considerable deal of overlap in their top 10 holdings.

"European equity income managers have the luxury of choosing from a much wider range of dividend-paying companies; there are over 250 companies in Europe with a dividend yield of 3.5 per cent and above, compared with around 80 in the UK," says Anna Haugaard, fund analyst at Brewin Dolphin. "Many of these companies are high-quality, globally focused and generating sustainable and often growing dividends."

One way to play this is with the BlackRock Continental European Income Fund (GB00B3Y7MQ71), which we last tipped in September 2013 for its ability to produce income and growth, experienced management team and below-average volatility.

Read the tip

The fund has continued to perform well, returning around 59 per cent compared with 33 per cent for the FTSE All World Europe ex-UK index since its launch in May 2011, making it one of the top performers out of 100 funds in the Morningstar Europe ex-UK Large-Cap Equity category, according to Ms Haugaard. "This category includes funds without a yield requirement, making the achievement even more noteworthy," she adds. "The fund hasn't achieved these returns by taking on high levels of market risk, however, it has outperformed by keeping marginally ahead of rising markets and significantly outperforming in falling markets."

The fund is first quartile in the Investment Association Europe ex UK sector over one and three years - again beating many growth-focused funds - and it also offers an attractive yield of 4.73 per cent. This is in line with its aim of delivering an above-average income without sacrificing long-term growth.

The fund's managers try to avoid risky or overvalued sectors, so look to invest at the right time in high-quality companies with a reliable dividend yield and dividend growth, as they have an emphasis on dividend security. The fund is well diversified geographically in terms of where its companies are listed, and larger exposures include the stronger areas of Europe such as Switzerland and Germany.

The fund can be bought for a reasonable ongoing charge of 0.93 per cent. It is on fund platforms including Alliance Trust Savings, Hargreaves Lansdown, Charles Stanley Direct, Barclays Stock Brokers and TD Direct.

Note that overseas funds such as this can incur currency risk because you have to translate the gain back to sterling, so UK investors lose out when the euro is weak again sterling.

The fund has a short track record of under five years, but it has proved itself so far despite currency fluctuations. Although it is fairly new it has experienced managers. So if you need to diversify your equity income this remains a good option. Buy.

Source: Morningstar, as at 13 February 2014

Performance of fund vs index

Source: Morningstar, as at 13 February 2014

Top 10 holdings, at 31 January 2015 (%)

Geographic breakdown (%)