Investors seeking steady income with diversification often turn to equity income funds. But it is important to look beyond just the highest yields and focus on performance as well.
We reviewed Europe equity income funds that invest in dividend-paying European stocks. Our criteria included strong returns over one, three, and five years. Three funds stood out, including one ETF:
- Fidelity Funds – European Dividend Fund
- Franklin European Quality Dividend UCITS ETF
- JPMorgan Investment Funds – Europe Strategic Dividend Fund
This article highlights the accumulation share classes of these funds, which reinvest dividends rather than paying them out. Income share classes, which distribute dividends, are also available and may suit retirees relying on income.
Europe equity income funds returned 10.61% over the past year. Their annualized returns were 10.98% over three years and 11.60% over five years. These figures slightly outperform the Morningstar Europe Index, which returned 7.57% over one year, 11.91% annually over three years, and 11.66% annually over five years.
These funds typically invest in large-cap European companies with above-average dividend yields. Our screening excluded funds with less than £100 million in assets and focused on the lowest-cost share classes, which may not always be accessible to individual investors.
Investors should consider both income needs and growth potential when choosing between accumulation and income share classes. Accumulation shares are often preferred by those still saving, while income shares may be better for retirees seeking regular payouts. Dividends paid outside tax-advantaged accounts like ISAs or SIPPs may be subject to income tax.
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