Where to find the best dividends

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

Different parts of the world offer very different levels of income. The map above focuses on two key metrics: the dividend yield and the payout ratio.

The dividend yield shows how much income an asset generates relative to its price. It is calculated by dividing a company’s annual dividend per share by its share price, then multiplying by 100. To calculate the yield for an entire region, you aggregate this data for lots of companies and apply the same formula.

The payout ratio is slightly different. Rather than focusing on the price of an investment, it shows the proportion of earnings a company or region will distribute to shareholders as dividends.

• Read: A to Z investing jargon buster

The UK boasts one of the world’s highest dividend yields - more than double that of North America. This is because the London Stock Exchange is dominated by old industries: banks, insurers and sellers of consumer staples account for about 40% of the FTSE 100⁴. These mature sectors are not particularly fast-growing, but they generate lots of cash which can be returned to investors.

Meanwhile, share prices - the other side of the dividend yield equation - are relatively low.

The situation is very different in the US, where technology is by far the biggest industry. Tech firms tend to be younger and faster growing, meaning they pump more money into expansion and research, and hand less back to investors. They also command a high price, as investors are willing to shell out for exciting growth prospects.

Chart 2: Time to concentrate

The UK stock market may offer a good level of income, but its pool of dividend payers is fairly concentrated. In fact, 10 businesses account for roughly half of all dividends paid by the FTSE All-Share⁵. This means that payouts are vulnerable to company and industry-specific shocks. In 2024, for example, miners - the largest dividend paying sector between 2021 and 2023 - slashed payouts by 40%, which weighed on overall growth⁶.

Elsewhere in the world, dividend payers are spread more thinly. If you are looking to diversify your income stream, therefore, it could make sense to look beyond home soil.

Chart 3: Asia calling

Asia is often viewed as a growth market, filled with emerging economies and young companies. However, the region has become more attractive to income investors over the past decade.

The shift has been fuelled by corporate governance reforms. ‘Cross-shareholding’ networks - in which listed companies hold big portfolios of one another’s shares - have been clamped down on, and the interests of minority shareholders have been prioritised.

Japan has led the charge on this, but South Korea - famous for its family-controlled conglomerates known as ‘chaebol’ - is now following suit. Fidelity analysts argue that Japan’s bank stocks look particularly promising from an income perspective, having been overlooked for years⁷.

China is also home to more dividend-paying companies than it was a decade ago. The country’s yield is still relatively low, however, at 1.3%. This is partly because the Chinese market contains lots of internet platform companies, which tend to pay low or no dividends⁸.

There are a variety of funds that focus on Asian income, including the Schroder Oriental Income Fund and Fidelity’s Asian Smaller Companies Fund.

Chart 4: British heavyweights

Even if you want to generate a chunk of your income overseas, it is worth knowing who the UK’s dividend giants are.

HSBC is by far the biggest income payer, doling out over £13bn of dividends last year. Banking rivals Barclays and Lloyds are also in the top 10, and NatWest is nipping at their heels. Payouts from banks have been particularly generous since the pandemic, as higher interest rates have turbocharged their cash generation⁹.

Oil and gas ‘supermajors’ are also big hitters, together with mining and tobacco stocks. These sector trends can be traced around the world.

A FTSE 100 tracker fund, such as the iShares Core FTSE 100 UCITS ETF, is a straightforward way to gain exposure to these UK heavyweights. If you want to focus specifically on income, however, you may prefer a fund such as the FTF ClearBridge UK Equity Income Fund, which features on our list of 50 favourite funds.

Source:

^{1,2,4, 5, 8, 9} FactSet
^3,7 Fidelity-International-Outlook-2026.pdf
⁶ Computershare dividend report

Get updates on markets, ISA funds, pension saving and much more

• Read: 6 money mistakes people make in their 60s
• Read: Will salary sacrifice changes impact me?
• Read: The US-China rivalry is a fantastic money-making opportunity