Global dividends hit a record high earlier this year, surging 8.2% to $606bn in the second quarter.
Looking ahead, the MSCI All Countries World Index, which measures the performance of the global stock market, is expected to offer dividend growth of over 4.5% over the next year. Although this isn’t a reliable guide of future income.
But where in the world is this investment income coming from?
This article isn’t personal advice. If you’re not sure an investment is right for you, ask for financial advice. Investments, and any income from them, will fall as well as rise in value, so you could get back less than you invest. Remember, yields are variable, and no dividends are guaranteed.
Where pays the most income?
The figures for the second quarter of this year, compiled by fund management group Janus Henderson, show dividend growth was broad based, rather than focused on a few countries or companies.
The table below shows the average dividend yield across the world over the past five years.
UK | Continental Europe | Emerging Markets | Asia Pacific (ex Japan) | Japan | US |
|---|---|---|---|---|---|
3.82% | 2.84% | 2.76% | 2.67% | 2.30% | 1.52% |
For investors whose goals are focused on receiving an income from their investments, it could be tempting to only look at regions that have historically paid the highest dividends, like the UK.
However, past performance isn’t an accurate guide to the future and there’s some nuance as to why a certain region might historically have produced a higher dividend or not.
For example, US companies don’t tend to pay out lots of dividend income and instead focus on ‘faster’ share price growth.
We’ve always said that investors should look to diversify their portfolios across different sectors and parts of the world. In an income-focused portfolio, this helps spread the sources of dividend income, without having to rely too much on one area.
Which companies pay the most income?
Some stock holdings with attractive dividend yields and solid track records of paying out income might include companies like Coca-Cola, Johnson & Johnson or HSBC.
However, for those aiming to build a broadly diversified portfolio with an emphasis on growing dividends over time, investing in dynamic, high-growth companies too can be beneficial.
Apple, Taiwan Semiconductor Manufacturing Company and Novo Nordisk are some examples, each having demonstrated substantial long-term performance and growth potential.
After all, you don’t have to take an either-or approach to income and growth investing. If it suits your investment goals, you can blend both styles.
How a fund can help you invest for income and growth
Most people won’t have the time or experience to continuously analyse the markets and look for the most attractive regions, industrial sectors and individual businesses.
A skilled fund manager can do this for you.
They can strategically tilt their portfolio towards these areas at any time to achieve a combination of regular income and the potential for strong earnings growth.
Investing in these funds isn’t right for everyone. Investors should only invest if the fund’s objectives are aligned with their own, and there’s a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.
For more details on each fund and its risks, use the links to their factsheets and key investor information.
NEW – HL’s Global Equity Income Fund
HL’s NEW Global Equity Income Fund is managed to offer a blended approach of income and growth.
It’s run by HL’s expert fund management team, with the help of who they believe are some of the best global equity income stock pickers in the market right now.
The team have blended the investment styles of these external managers for a best-of-all approach.
The fund invests all around the world, including higher-risk emerging markets, and aims to provide a monthly income, which is managed for you by the HL team. All investors need to decide is whether they want to take that income or re-invest it.
HL UK Income Fund
The UK has historically been one of the best places for income in the world. So, if you’re looking for income at home, HL’s UK Income Fund could be a good option.
Like with the NEW HL Global Equity Income Fund, HL’s experts have hand-picked a team of external fund managers who they believe offer the best potential for long-term performance.
This fund also aims to deliver both a regular income and long-term growth. However, as the focus is on UK companies, investing in other parts of the world, alongside this fund, is sensible. The fund may invest in smaller companies, which are higher risk.
Both of these funds are managed by Hargreaves Lansdown Fund Managers Ltd, part of the Hargreaves Lansdown Group.