01/06/2011
By Matt Ritchie
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.
The struggles of the indebted economies of Greece and Portugal have dominated news flow of late, though Macklow-Smith said equity markets in the European region have edged ahead of global equities in Euro terms so far this year.
International and improving domestic demand have driven growth in company profits and revenues in Europe, and European companies are therefore looking attractive for investors, said Macklow-Smith.
“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,” he said.
According to JPMorgan dividends in Europe grew around 10% last year 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.
“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,” Macklow-Smith said.
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