With income from bonds and cash dwindling, investors with a higher tolerance to risk could “do worse than turn to equity income”, says Investors Chronicle. A global approach not only provides diversification, it enables investors to buy into markets such as Europe, which are cheaper than Britain and offer more attractive dividend yields.
One of the sector’s best performing funds is Newton Global Higher Income. The £2.82bn fund is up 18.37% over one year and 42.05% over three. It targets dividend income from high-yielding equities, plus long-term capital growth. Lead investment manager James Harries decides what to buy and sell but is supported by Newton’s team of specialist equity analysts. All new holdings must have a prospective yield that is 25% higher than the FTSE World Index – any holdings that fall below this benchmark are sold.
Harries is currently 38% invested in North America and 30% in Europe, favouring tobacco and pharmaceutical stocks. However, emerging markets are also a theme. “Traditionally, the UK has been a good place for dividend-paying equities,” he tells Telegraph.co.uk. “However, investors who require income are often overexposed to the UK marketplace and to the sterling currency. We think it makes sense to take some of that cash and put it overseas.” Besides America, Harries is also targeting companies in Brazil and Asia.
The fund, which yields 4.8%, is “one of the longest-running international equity income funds and one of the best”, says Bestinvest.co.uk. It’s “a good buy for more cautious investors”.
Contact: 020-7163 9000.
Newton Global Higher Income top ten holdings
| Name of holding | % of assets |
|---|---|
| Reynolds American | 5.40% |
| Philip Morris | 5.40% |
| Roche Holdings | 3.20% |
| Bayer | 3.20% |
| SSE | 2.50% |
| Merck & Co | 2.20% |
| Abbott Laboratories | 2.20% |
| Pfizer | 2.10% |
| China Mobile | 2.10% |
| GlaxoSmithKline | 2.10% |