The Henderson Global Dividend Index (HGDI) revealed overall pay-outs around the world grew 11.7 per cent in the second quarter to a record $426.8bn – an increase of $44.6bn.
“That increase is equivalent to a whole year’s worth of Japanese dividends,” the report said.
Henderson says Europe’s dividend growth accounted for more than two-fifths of the global total, paying out $153.4bn – an 18.2 per cent increase.
Companies in France and Switzerland led the dividend charge, while Germany lagged behind its peers.
“The European total was boosted by strong exchange rates against the US dollar,” Henderson said.
“Even so, the $16.4bn constant currency growth from Europe is the best performance from the region by far over the five year history of the HGDI.”
Henderson’s head of global equity income Alex Crooke says 2014 is on course to deliver the fastest growth in global dividends since 2011.
“Only this time, most of that growth will come from increases in pay-outs from firms themselves, rather than from swings in currencies,” he said.
Talib Sheikh, manager of the JPM Multi-Asset Income fund, is upping his allocation to European dividend-payers, picking up companies like Swedish bank Swedbank and specialist energy company GDF Suez.
Europe and the eurozone combined also makes up the highest proportion of Jacob de Tusch Lec’s five-crown rated Artemis Global Income fund.
The positive newsflow is in stark contrast to the UK, with dividend growth at its slowest in the second quarter of this year since 2010, with the exception of a “freak quarter” in 2013.
For those interested in getting exposure to Europe’s prospects for dividend growth, these three funds may be of interest.
Standard Life Investments European Equity Income
The five-crown rated fund is part of the FE Select 100 list of recommended funds and aims to provide both income and some capital growth over the longer term by investing in European companies.
Manager Will James typically holds a concentrated portfolio 40 to 70 of stocks, though he can hold some bonds to supplement the fund’s income.The manager tends to hold 50 per cent of the fund in companies which pay a high and stable dividend, 35 per cent that demonstrate the potential for dividend growth that he thinks are underappreciated in their share price and the remaining 15 per cent in companies he believes will surpass market expectations with future dividend payments, according to FE Research.
The team says the manager’s focus on higher yielding companies means that it should do well in falling markets and given the uncertainty and high valuations out there, it could be a good one to hold if you fear a correction.
Richard Romer-Lee and his team at Square Mile agree.
“The fund is managed by a portfolio manager who understands the needs and requirements of private individuals. We consider him a safe pair of hands,” the team said.
FE Research expects the fund to continue delivering a steady dividend, which currently stands at 3.93 per cent, making it the third highest yielding fund in the sector.
The fund has also fared well form a total return perspective, returning 65.32 per cent over the last five years while the IMA Europe ex UK sector made 53.54 per cent.
Performance of fund and sector over 5yrs
Source: FE Analytics
As the FE Research team highlighted, the fund fared better than its peers in the down markets of 2011, losing 10.55 per cent compared to the 15.57 per cent loss from the sector.
The fund also managed to outperform in 2010 and 2012, though lagged the rally in 2013.
Standard Life Investments European Equity Income has ongoing charges of 0.90 per cent.
BlackRock Continental European Income
Last year, Andreas Zoellinger, manager of the BlackRock Continental European Income fund, argued Europe was a better hunting ground than the UK for income because there were significantly more dividend-paying mega cap companies on offer.
The five-rated portfolio is the fourth highest-yielding fund in the sector at 3.77 per cent. It’s also smashed the performance of its peers and the FTSE World Europe ex UK index from a total return point of view of late.
Since its launch in May 2011, the fund is up 37.1 per cent, more than doubling the returns of the sector and index.
Performance of fund, sector and index since 2011
Source: FE Analytics
Zoellinger, alongside co-manager Alice Gaskell, favour financials. They are also backing specialist energy firm GDF Suez in their top-10, as well as European pharmaceutical giants Bayer and Novartis.
The fund has ongoing charges of 0.90 per cent.
FP Argonaut European Enhanced Income
The tiny £59m FP Argonaut European Enhanced Income fund is the highest yielding fund in the IMA Europe ex UK sector and has five FE Crowns to its name.
Launched in April 2010, the fund has gained 33.69 per cent, only slightly ahead of its peers, which made 33.36 per cent. The fund’s benchmark, the MSCI Europe ex UK index, made 27.7 per cent.
Performance of fund, sector and index since 2010
Source: FE Analytics
Like the Standard Life portfolio, the Argonaut fund’s focus on delivering a higher-than-average income means it fares better in falling markets, as shown by its outperformance in 2011.
The fund performed broadly in line with the index in 2012, but lagged both the sector and index last year. It is by far the highest yielder on the list, with a figure of 4.48 per cent according to FE Analytics.
The fund is slightly more expensive than the others on this list, with ongoing charges of 0.98 per cent.
