Bet on non-Western economies for income

EQUITY INCOME

In the second of a three-part series on equity income, Anthony Eaton, manager of the CF JM Finn Global Opportunities fund, says with Western economies now maturing, Africa and Asia are the continents to back for income.

It is well known share prices are ultimately driven by dividend income. Markets value a business primarily by anticipating its future earnings capability, and so income is important. But capital growth can only be delivered if the market believes the subject will prosper. A high P/E, or even no P/E, simply reflects an anticipation of ramping profitability and distribution round the corner. The conundrum for investors currently is to ensure the valuation of future income flows is both absolute, in isolation, and relative to the cost of money. Income streams In recent years, the co...