F&C's Cosh: Investors' laser focus may be missing the point

ON EUROPE

There are two things that dictate returns over the long term, the price you pay for an asset and the cash flows that it delivers. Everything else is mainly a distraction.

While the macro environment has proved to be a rather large distraction in recent years, it has given investors the opportunity to acquire assets which are cheap on both an absolute and relative basis, certainly relative to bonds but also to most international equities. Investors who have been laser focused on income seem to ignore the fact that the prospective dividend yield on pan European equities is above 3.5% and these dividends are well backed by strong cash flows and balance sheets, and have no expiration date, in contrast to bonds. The point about relative corporate prosperity...