War, the ballooning cost of living and the spectre of recession have not made for a cheerful backdrop in recent months, and that mood is very much reflected in markets. But there has been cause for optimism in a few areas, one being the dividend space. Janus Henderson’s latest Global Dividend Index reports that payouts rose by 11 per cent in the first quarter of this year, with big increases across different regions as dividends continued to recover from earlier stages of the pandemic. Those payments are a very real buffer for investors who have seen their portfolios knocked around in recent months.
Investors are less likely to be getting their overseas dividends via share picks, so which global equity income funds have handed out the most cash to investors? The figures can be skewed by differing frequencies of payments, but FE data suggests that, had you invested already in late 2021, the biggest sums so far this year would have come from Majedie Investments (MAJE), Murray International (MYI), UBS Global Enhanced Equity Income Sustainable (GB00BL0RSP87), Henderson International Income (HINT), Fidelity Global Enhanced Income (GB00BD1NLJ41) and JPMorgan Global Growth & Income (JGGI).
There’s quite a range of approaches on offer here. The presence of the UBS and Fidelity funds reminds us that writing call options to boost income can be a pretty effective tool in the world of dividends. If such a tactic means you can lag rising markets, it can also limit the pain when everything is falling. These two funds are in the black for the last six months or so.
The four other funds, all investment trusts, recently traded on dividend yields near to the 4 per cent mark at the very least, a pretty attractive level in the context of global income strategies. But what seems most important is the approaches they take and how these might serve you in the coming months.
With no crystal ball to hand, I can at least reiterate some of the issues worrying investors most. A recession could throw up all manner of challenges, while in a dividend context there is a valid concern that rising payouts are too reliant on cyclical sectors such as mining, especially in areas such as the UK and Australia. Different problems have already emerged elsewhere: Janus Henderson has pointed to “notable weakness” on the dividend front in parts of Asia because of recent Covid lockdowns. Separately, we have previously discussed the fact that some global equity income funds have tended to stick with big US allocations, perhaps out of fear of underperforming the MSCI World index too much.
That’s perhaps why some of the names above stand out. To take one example, Murray International has been on a strong run in the last half year, aided by a mixture of different (and unconventional) exposures. When it comes to geographical regions the fund has tended to have very little in the UK while also going underweight the US. At the end of March it had just over a quarter of its assets in the US, with a similar weighting to Asia, a 19.3 per cent allocation to Europe and 12.7 per cent in Latin America and emerging markets.
Time will tell if such an approach continues to work. But a differentiated dividend strategy could continue to dispel some of the market gloom, and asking where the income comes from seems especially pressing right now.
