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BlackRock: Income opportunities in Europe outpace the UK

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UK investors should look to Europe for a larger and more diverse range of income opportunities, according to fund manager BlackRock.
BlackRock: Income opportunities in Europe outpace the UK

In 2012 the size of the continental Europe dividend pool was €138bn, compared with €76bn in the UK, according to the firm, while the number of large-cap stocks yielding more than 4 per cent was 82, compared to just 31 in the UK.

Europe also represents a “much less concentrated” income region, with the top ten dividend-paying firms accounting for just 23 per cent of total dividend income against 56 per cent in the UK.

Alice Gaskell, co-manager of the BlackRock Continental European Income fund, said: “We have seen early signs of a recovery in the European consumer sector, with improving business confidence and falling unemployment, which has been positive for European equities. Dividend growth in the Continent is expected to be robust for the remainder of 2014 and into 2015.”

The manager has been avoiding areas of the European market where dividend risk is higher, such as banks, but she said investments in infrastructure and real estate have benefitted both from an improving European economy and lower political risk.

“Financial discipline remains strong in Europe and many companies have repaired their balance sheets, to such an extent, there is capacity to return capital to shareholders via special dividends, notably in the insurance sector. After a period of restraint, 2014 will likely see more M&A activity and investment in general,” added Gaskell’s co-manager, Andreas Zoellinger.

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