What you need to know about the equity income landscape

For a decade or more, generating an income from dividends was seen as an old-fashioned pursuit. The smart money was all in the go-go capital growth options such as India or US technology. The recent volatility appears to have reminded investors of the comfort of a nice dividend – and the equity income sector has been delivering stronger capital returns as well. 

The volatility since the start of the year has realigned the performance of global and global equity income funds. Global equity income funds had not been able to participate fully in the US technology trade (because the tech companies don’t tend to pay large enough dividends), which has been a performance headwind. 

The average Global equity income fund is up 1.5% for the year to date, having climbed 11% in 2024. In contrast, the average Global fund has dropped 2.4% for the year to date, after solid gains of 12.6% in 2024*. Among our rated funds, it has been strong period for funds such as Fidelity Global Dividend, TM Redwheel Global Equity Income and IFSL Evenlode Global Equity Income, all of which are top quartile since the start of the year*. These funds all tend to have a higher weighting in areas such as consumer staples and lower weights in the US.

What about UK equity income?

UK equity income funds have outperformed their UK All Companies peers, with a sector average return of 4.8% since the start of the year (and 8.7% in 2024), versus 3.8% and 7.9%*. While the UK market appears to have been a beneficiary of flows out of the US market since the start of the year, the benefits appear to have accrued almost entirely to the large-cap part of the market, which has benefited UK equity income funds over UK All Companies funds, which tend to have more in small-caps.

This has meant funds such as CT UK Equity Income and Artemis Income have done particularly well. However, if stronger performance encourages investors back to the UK market, small and mid-caps may pick up. That might see funds such as the IFSL Marlborough Multi Cap Income reignite.

How does equity income stack up globally?

Europe has seen an astonishing performance since the start of the year, with the average Europe ex UK fund up 10.7%*. Only Latin America has performed better. More defensive and value-focused stocks have led the sector higher, with the MSCI Europe Value index outperforming the MSCI Europe by around 4.6% since the start of the year**. This has favoured equity income funds. Of the top 10 performing funds for the year to date, four are dividend-focused options. Notably, there are no dividend-focused funds in the bottom 30 funds*. Janus Henderson European Focus, for example, has been a good performer in this market. 

Our Elite Rated funds have all performed substantially ahead of the broader Asia ex Japan sector over the past year. The average Asia Pacific ex Japan fund is up 0.2% over the past 12 months*. The Jupiter Asian Income fund is up 5.5% over the same period*. The Guinness Asian Equity Income fund is also up 5.5%, while the Schroder Asian Income fund is up 6.1%*. The Schroder Oriental Income Trust – which has some gearing – is up 6.5%*. Asian equity income funds have less exposure to both China and India, so have been less volatile over the past year as each market has bounced around. 

More diverse income options

It has also been a better moment for diversifying income options – infrastructure, for example, has had a strong run. The average fund is up 4.7% since the start of the year*. Funds such as First Sentier Global Listed Infrastructure showed resilient performance in 2024 and have kept it up in 2025. Specialist multi-manager funds that blend a range of equity income options (usually with some fixed income exposure as well), such as IFSL Wise Multi-Asset Income or the Jupiter Merlin Income Portfolio, have also had a good period of performance. To learn more about the income opportunities in the multi-asset space, read our latest insights on why now is a good time for multi-asset income.

All in all, it’s been a good run for investors who like their stock market exposure to come with a side of income. The US market and its dominant technology sector may have bounced back, but recent market conditions should have reminded investors of the merits of an income approach. 

*Source: FE fundinfo, 13 May 2025

**Source: index factsheet, 30 April 2025