M&G urges ISA investors to go global for a growing income

Investors seeking a growing income from this year's ISA should consider a global equity fund, says M&G Investments.

Research shows that the reinvestment of dividends generates the bulk of returns from shares over the long term, helping to explain the popularity of equity income funds among UK investors.

"But why limit your choice of investments to the UK?" asks Stuart Rhodes, manager of the £925 million M&G Global Dividend Fund. "A strong dividend culture is not unique to our own country."

The US, for example, has more than 90 companies which have continually grown their dividend payments each year for a quarter of a century or longer. This compares with less than 10 companies in the UK with a similar record.

Other countries where the climate is conducive for dividend growth include Brazil, which requires companies by law to distribute 25% of net profit as dividends, and Australia, which has a taxation system that favours dividends.

"By going global, an investor has more than 15,000 companies from which to choose, compared with about 1,500 listed on the London Stock Exchange. This wider choice allows the portfolio to source its income from a broader range of companies and provides diversification on a geographic basis," says Rhodes.