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Equity Income - September 2014

    CPD
    Approx.60min

    Introduction

    Aside from some tricky and as-yet-unresolved geopolitical issues in Eastern Europe and the Middle East, on the whole, the road to recovery in 2014 has been fairly steady. But for income investors the search for yield remains a difficult task.

    There may be an economic recovery, but it is still a low-growth environment and central bank policy remains extremely accommodative, a fact underlined by Mario Draghi’s surprise announcement on September 4 of an asset-purchasing programme and a “final” rate cut to an unprecedented 0.05 per cent and its deposit rate to -0.2 per cent.

    So with bond yields low and virtually no return on cash, investors are naturally turning to the equity market. But with traditional income stocks under pressure, such as Tesco’s struggles with its earnings and the levying of an $18bn fine on BP over its ‘negligence’ in relation to the Deepwater Horizon disaster, where should investors be looking?

    Many point to the fact that equity income is no longer just about the blue-chip stocks, and investors need to adapt to the changing world and branch out – not just to different areas of the market cap, but also to alternative industries and even to different regions.

    For example, the latest Henderson Global Dividend Index notes that while the largest proportion of dividends paid in the second quarter of this year came from the US and European countries, the fourth- and fifth-largest payouts came from Asia.

    Japan recorded total dividends of $25.2bn, while Hong Kong accounted for $20.6bn.

    In the past five years, Asia has substantially overtaken the UK in terms of dividend payouts, and with emerging markets looking to regain their stability, improvements in corporate governance and regulation suggest this could be the next fertile ground for dividends.

    While investors are continuing to seek income, especially with pension changes in the UK making it likely more people will be investing for longer, it pays to think outside the box.

    Nyree Stewart is features editor at Investment Adviser

    In this special report

    CPD
    Approx.60min

    Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

    1. Japan paid out total dividends of how much in the second quarter of this year, according to the Henderson Global Dividend Index?

    2. By how much did UK dividend growth increase in the second quarter of 2014?

    3. The number of dividend-paying companies in emerging markets has grown from 78 at the start of 2001 to what number at the end of 2013?

    4. Dividends from companies in the Asia Pacific region reached $38.4bn in the second quarter of 2013 with the majority coming from where?

    5. In the three years to September 4 2014, what was the return delivered by the MSCI Asia Pacific index?

    6. Which of thte IMA-listed Asian income funds delivered the best return when ranked by one-year performance?

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