Income investors generally look at reliable yield stocks or firms with the ability to grow their dividend over time, or some combination of the two. By definition, according to Stephen Thornber, fund manager at Threadneedle, this either means investing in businesses that can generate plenty of cash to return to shareholders over time or in companies that can become decent and dependable dividend payers in the future. Neither of those, he highlights, are a bad place to be. “It does require a long-term perspective, however, and consequently you won't usually find income investors following the latest investment fads.” Thornber lists the following ten reasons to invest in global equity income:
1. Equity income investors take a long-term perspective.
2. There are no signs of an income bubble.
3. Income strategies have outperformed strong-performing equity markets in the last few years. But remember that dividends (and dividend growth) drive total real returns from equities – and could become even more important in a low growth/low return world.
4. Income stands up as an investment approach in its own right.
5. Dividend payouts are sustainable because corporates are in good health.
6. Global approach provides wider opportunity set.
7. Boring can be good.
8. Income investing provides good financial discipline.
9. There are great opportunities for contrarian investors.
10. Income investing provides some inflation protection.
You may access Threadneedle's full report through this link.