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Equity income: home is where the heart is?
by Dylan Lobo on Dec 27, 2012 at 07:00
Research from Société Générale Cross Asset Management highlights the concentration risk in the UK, with 10 stocks headed by Royal Dutch Shell, Vodafone and HSBC contributing more than 60% of the market’s total dividend.
A number of groups have come to market with global income products to exploit both concentration concerns in the UK and excitement about the growing overseas opportunity.
The most recent of these was Kames Asset Management, which launched its global proposition into the retail market at the end of September.
‘The UK has a deserved reputation as a high-yielding equity market. But other markets are catching up as an increasing number of international companies pay dividends to shareholders,’ the asset manager said in a statement accompanying the launch.
Stuart Rhodes, manager of the £3.6 billion M&G Global Dividend fund, outlines just how compelling this international opportunity is.
‘Investors are missing out on many excellent opportunities if they restrict themselves to the UK – a strong dividend culture is not unique to the UK,’ Rhodes says.
‘The US, for example, has more than 90 companies that have consistently grown their dividend payments for over 25 years, a reflection of the strong dividend culture in this region.
‘It is law in Brazil that listed companies have to pay 25% of profit as dividends and there is a favourable tax environment for dividends in Australia, making these regions interesting for dividend investors.’
This threat from global completion is underlined by recent fund buying behaviour.
According the Investment Management Association, in the 12 months to the end of August, UK income funds experienced net inflows of £485 million, which was dwarfed by the £872 million enjoyed by their global competitors.
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Ian McVeigh and Steve Davies, managers of Jupiter's UK Growth fund, talk about their predictions for the UK equity space. Click here to watch a series of sponsored interviews with Jupiter's fund managers on the UK equity market.