Investors should look to European equities, which are outperforming and have strong dividends, according to the manager of the JPMorgan European Investment Trust, Stephen Macklow-Smith.
Macklow-Smith reported that while Portugal and Greece have been dominating news flow in Europe, the region's equity markets have edged ahead and have outperformed global equities in Euro terms year to date.
Stephen Macklow-Smith said, "Europe has long been recognised as a home to world-leading companies, and demand for their products is strong both in emerging markets and developed markets alike. In addition central Europe has continued to recover: consumer confidence in many countries is up, unemployment is starting to stabilise and spending is resilient. As a result of both international and improving domestic demand, company profits and revenues are growing and European companies are therefore looking attractive for investors."
He went on to say that combining these factors with long-term data showing that the majority of returns from equities comes from dividend yield and dividend growth and you arrive at a strong case for investing in high dividend yielding stocks.
In Europe dividends grew around 10% in 2010 and are expected to grow by a similar amount in 2011 - fuelling a shift to equities from income-hungry investors. In addition, European equities continue to offer a yield of over 3% and remain the only asset class yielding more than their ten-year average. Macklow-Smith believes that with the climate of low interest rates likely to persist, equities should continue to benefit.
Macklow-Smith said, "Dividends have been the most important driver of equity returns over the long term* and as European companies currently have strong corporate earnings, healthy cashflow and rebuilt balance sheets, we expect to see many companies not only maintain, but grow dividends."
Talking more about the JPMorgan European Investment Trust, Macklow-Smith said, "The closed ended nature of the investment trust means we are able to hold some of the best yielding opportunities over a longer time horizon without the risk of fund redemptions impacting holdings cum-dividend. At present the portfolio is overweight financials, industrials, consumer discretionary and telecoms and underweight consumer staples, healthcare and materials."
The JPMorgan European Investment Trust - Income shares aim to grow income together with the potential for long-term capital growth from a diversified portfolio of investments in Pan-European stock markets. Over the last year to 25 May 2011, the Income shares have appreciated 27.02% with NAV growth of 20.91%, while the benchmark, the MSCI Europe Index has appreciated 19.07%.
Further details on the Company are available at www.jpmeuropean.co.uk/
*Over the last 25 years, in excess of 90% of total returns from European equities come from dividends (yield and growth)
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