Deep Dive: Focus on the dividends as recession takes hold

'Fundamentals start to matter more'

The global equity income sector is having to shift in the face of a potential recession, as managers and analysts see both benefits and risks in the volatile economic prospects ahead.

Patrick Farrell, CIO and head of research at Charles Stanley, said an economic slowdown would be reflected in corporate earnings, as company budgets are "squeezed" by inflation and the cost of borrowing. However, in periods of economic uncertainty, fundamentals start to matter more to investors, he said, with dividends especially important as an indicator of financial health. He added that income funds tend to be more value-orientated, as the high-flying growth stocks tend not to pay out a dividend. This means a global income fund offers significant diversification benefits, allowi...