By Ian Cowie

The Sunday Telegraph

Sunday 11 November 2012

Emerging economies are robust and firms there are waking up to the importance of dividends. So it may be time for investors to diversify, says Ian Cowie

Anyone seeking income from their investments is being urged to reconsider conventional attitudes toward international asset allocation and risk following the re-election of President Barack Obama last week. Unlike his defeated opponent, Mitt Romney, Mr Obama is expected to extend the American government's policy of quantitative easing (QE) - in effect, printing money - which would tend to weaken the dollar's exchange rate. British and American use of QE, in a bid to prevent recession turning into a slump, has already reduced what sterling and the greenback will buy overseas.

As a result, some experts say the time has come to consider income opportunities denominated in other currencies - even, most controversially, emerging markets. Enthusiasts point out that these countries have high savings levels - unlike the developed world, where excessive debt caused the credit crisis - and so they are less risky than most people imagine.

There is certainly plenty of choice. While only about one in three companies in emerging markets paid any dividends a decade ago, the total is nearer nine in 10 now. More importantly, dividend payouts in emerging markets are growing more than twice as fast as those in countries such as Britain. ......

...... Alan Steel of Alan Steel Asset Management expressed doubts about how overseas income would translate into sterling.

He said: "I know that dividends are probably going to increase in emerging markets, but income seekers tend to be quite cautious and it's not a certainty that emerging market currencies will appreciate against sterling.

"I happen to believe that the US is the place to seek out quality income and growth opportunities, regardless of the election result. That's thanks not to politicians but to the oil and gas boom likely to occur there shortly." ......

Quote courtesy of The Sunday Telegraph

Sunday 11 November 2012