Europe v UK: Where can I find equity income?
In the second part of our series looking at income, this infographic compares the key sources of equity income across continental Europe and the UK, and how they have changed since the markets peaked in 2000 at the height of the technology, media and telecoms boom.
The hunt for income
Income is a major consideration when choosing an investment.
Yield opportunities across fixed income and currency investments, however, have dwindled in the wake of the 2008 credit crisis; a result of historically low interest rates.
But equities have been a big beneficiary of the low-interest-rate environment. And, despite the significant challenges posed by the economic downturn, companies, in the UK and Europe in particular, remain among the best income payers in the developed world - as we explored in the first part of this series.
So, how do European equities compare to their UK counterparts when it comes to paying income, and where can investors find the best yield?
Sources of income
The UK equity market has been one of the best sources of equity income in the world as British companies have historically been very focused on paying a progressive dividend.
UK equities currently offer a premium yield to their European peers, which is in part due to the slow economic recovery in the eurozone. By contrast, British companies, which enjoy a high degree of global diversification, have been much earlier in increasing dividend payments.
Oil and gas companies are regarded as fairly reliable dividend payers, which is why they remain a favourite among pension funds.
Companies such as utilities, where demand and cashflow are always going to be strong due to the nature of their businesses, in general, have also been reliable sources of equity income in the past.
The characteristics of dividend payers, however, are not set in stone. Telecoms, for instance, were among the worst dividend payers in 2000, but in 2015 they are among the top five yielding sectors both in the UK and Europe.
Investors should research their investment thoroughly and consult their financial adviser. Investing for equity income places your original capital at risk.
The historic equity market performance above shows that investments in equities can be volatile.
Their values may fluctuate quite dramatically in response to the results of individual companies, as well as general market conditions.
Please remember that past performance is not a guide to future performance and may not be repeated. The value of investments and the income from them may go down as well as up and investors may not get back the amounts originally invested.
The third part in this series “how safe is your income?” will explore the sustainability of dividends in Europe and the UK.
You can revisit part one of the series, yield explainer: the importance of income.
Download the full infographic in PDF form below.
The views and opinions contained herein are those of Schroders’ investment teams and/or Economics Group, and do not necessarily represent Schroder Investment Management North America Inc.’s house views. These views are subject to change. This information is intended to be for information purposes only and it is not intended as promotional material in any respect.