Tom Bailey argues the case for looking beyond the UK for the best dividend-paying shares, flags up potential pitfalls, and asks professional investors to tip their favourites in different regions
UK companies as a whole have been among the world’s most reliable and generous dividend payers historically. Russ Mould, investment director at AJ Bell, says: “Dividend payments date back to the mercantilist origins of the British Empire. At the time, ships and voyages were funded by the wealthy, who took their cut on the return of those vessels, once costs had been met and goods sold (assuming the ships returned).”
Today the UK is still ahead of many countries in terms of dividend payments. Currently, the UK market is on a yield of around 5%, way above those in most developed markets.
However, increasingly, the rest of the world is serving income investors better than it used to. Moreover, by including dividend-paying companies from overseas in their portfolios, UK investors can diversify further, thereby reducing risk.
Ben Lofthouse, manager of Henderson International Income investment trust, says: “It makes
INVESTORS WHO INCLUDE AN INTERNATIONAL ELEMENT IN THEIR SHARE PORTFOLIOS SPREAD THEIR RISK Ben Lo house no sense to eschew overseas companies. Investors who add an international element to their share portfolios spread their investment risk, not just across a wider range of different economies but across sectors and companies.” However, whether investors look for income overseas or prefer to stay at home, it is important that they delve into the dividend detail to assess future sustainability and reliability.
THE REST OF THE WORLD IS CATCHING THE UK One valuable tactic is to examine the dividend history of a company. According to Stuart Rhodes, manager of M&G’s Global Dividend fund: “History is a good indicator of whether a board has shown a willingness and commitment to
24 August 2019