Top sectors for dividend growth revealed

Published by Nathalie Bonney on 05 October 2011.
Last updated on 05 October 2011


In spite of the current eurozone crisis, Europe has posted dividend growth of 20.3% in the past five years.

Current volatility is hiding the fact that European companies are in an "excellent" and "competitive" position globally, says Stephen Macklow-Smith, manager of JPMorgan's European investment trust.

"They [European companies] are currently trading at attractive valuations and with the Euro trading at highly competitive exchange rates these companies are benefiting," he says. "We expect to see news around European dividends remain positive."

Outstanding yields

Specialist sector Commodities and Natural Resources follows Europe, with five-year dividend growth of 15.1%. UK Smaller Companies is in the third spot with 11.5% dividend growth over five years, followed by 10.5% from Asia Pacific excluding Japan and 8.6% for Global Growth & Income.

Average dividend yields of these top dividend growth sectors are less outstanding. The European sector has averaged yields of 2.2%, with Global Growth & Income the most impressive, reporting yields of 4.4%.

Annabel Brodie-Smith, spokesperson for the AIC, says dividends are a "crucial component" of investing, particularly in a low-interest, inflationary environment:

"The investment company sector occupies a privileged position when it comes to growing dividends.

"Some 16 investment companies have consistently raised their dividends each year for over 20 years with several investment companies breaking the 40-year mark."

The structure of investment companies enables them to hold back up to 15% of their annual income in reserve, making it easier to still pay dividends in leaner years.


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