Broaden your income horizons with Artemis Global Income

Bull points

Attractive yield

Diversified Income

Sustainable income focus

Good total returns

Bear points

Overseas equity risk

IC TIP RATING

Tip style: INCOME

Risk rating: MEDIUM

Timescale: LONG TERM

Broker AJ Bell says the dividend cover of FTSE 100 companies - the ratio of a company's net profits in relation to the sum allotted to shareholders in dividend payouts - is looking thinner than ideal with only one of the top 10 highest-yielding stocks having a dividend cover over two. Miner BHP Billiton (BLT), meanwhile, has warned that it may have to cut its dividend due to a writedown on its US shale assets.

So income investors biting their nails over the fate of UK dividends should look to Artemis Global Income (GB00B5N99561), a fund with a stellar record that gleans opportunities from less well-trodden paths and has the whole world - rather than just the UK - to choose from.

Artemis Global Income is run by Jacob de Tusch-Lec who deliberately avoids the popular, more stereotypical equity income plays in the UK and globally, making this fund a "distinct offering when compared with its global equity-income peers", according to analysts at Morningstar.

The fund targets a yield of 4 per cent and currently offers a yield of 4.2 per cent. It has also made good total returns: over five years the fund has returned 68.6 per cent compared with 35.9 per cent for the Investment Association (IA) Global Equity Income sector and 33.4 per cent for the MSCI All Country World Index.

The fund also has greater potential than its peers to grow its income over the long term due to its stock selection process. Instead of looking just at dividend yields, Mr De Tusch-Lec screens for free cash flow. That means he can home in on stocks able to grow their cash flow over time, rather than the ones with currently impressive but unsustainable yields.

The fund has an unconstrained mandate so, although it mainly invests in global equities, it also has exposure to fixed-interest securities and is not restricted in terms of company size, industry or geographical split.

"The best global funds are those with an unconstrained approach and a manager with a lot of stock-picking flair," says Rob Pemberton, investment director at HFM Columbus.

And he highlights Artemis Global Income as one of his favoured funds.

Research company Fund Calibre adds that "this is one of the top-performing funds in what is becoming an ever more important sector. Jacob's process is well-defined, but allows some flexibility for him to express his views. His slightly atypical approach to identifying stocks, namely by avoiding mega-caps, has served the fund well and is a distinguishing feature. We think this is one of the strongest funds in the global equity income sector."

The fund's largest geographic exposure is Europe ex UK, which accounts for 39 per cent of the assets, followed by North America at 34 per cent and the UK at 10 per cent. The eurozone is deemed one of the hottest areas for investment in 2016 by analysts due to its potential for an economic recovery, combined with a boost for equities from the central bank's monetary easing policy. Mr De Tusch-Lec de-risked the fund throughout 2015 and his focus is now on quality rather than value.

He says: "For now, we prefer to stick to European and Asian 'bond proxies' - equities with dividends that can be relied upon like the coupon on a bond - and companies that will benefit from the strength of the US economy."

Source: Morningstar

Performance (cumulative total return %)

Source: Morningstar, as at 15.01.16

Top 10 holdings as at 31 December 2016

Sector allocation