Where to invest for income rising 10pc a year

investors that the London market’s high yield means it is the best place for income is also challenged by UK companies’ contribution to global dividends. British stocks account for only 8.1pc of all dividends paid around the world.

Emerging market stocks, a group that includes Asian and Latin American companies, offered dividend growth of 6.7pc a year and a yield of 2.9pc, while they pay out almost as much as British ones in cash terms.

Andy Jones, the author of the report, said investors should study the relationship between dividend growth and yield, as each region had its own merits.

“America only has a yield of 2pc but has excellent growth, whereas Europe has a 3.3pc yield but worse growth. You have to balance it out and go for growth in the US and yield elsewhere,” he said.

Helen Bradshaw, an income investor at Quilter, the wealth manager, said it was increasingly important that investors diversified their income. The forecast for British dividends was weakened amid high-profile cuts from firms such as Vodafone, while slowing economic growth was making markets more choppy.

Ms Bradshaw added: “Britain’s yield is attractive but investors need to be selective, as some companies have had to cut their dividend or haven’t got enough cash or profits to afford future dividends.

“Investors may not have thought about other regions such as emerging markets. The benefit of looking further afield is diversification and getting different drivers of return.” Dividend growth figures are over the previous 10 years. Data from Janus Henderson

Ms Bradshaw said global income investors would also benefit if market sentiment changed around the type of stocks favoured. High-growth companies not associated with dividends have been driving global markets forward, but a reversal in favour of high-yielding stocks would drive their share prices up.

She added: “We also have a potential scenario where income stocks that return capital to shareholders become the most sought-after companies.”

In America Mr Jones recommended buying technology firms, but not the likes of Google owner Alphabet, Amazon or Netflix. He said Microsoft and Cisco were more attractive because they offered a balance between yield and growth. Microsoft yields only 1.3pc but has grown its dividend by double-digit percentages for the past decade. Cisco yields 2.9pc and has dividend growth of 7pc-8pc.

In Europe he backed consumer stocks and food companies such as

Danone and Nestlé, which both yield 2.3pc and offer good growth. The latter firm was the world’s largest dividend payer in cash terms until very recently.

In emerging markets Mr Jones was more cautious but recommended electronics giant Samsung and Taiwan Semiconductor, a manufacturer of electronic components. These stocks yield 3.2pc and 3.9pc respectively and have a good record of dividend growth.

For investors who don’t want to pick their own stocks, the Fidelity Global Dividend fund, run by Dan Roberts, yields 2.6pc while BNY Mellon Global Income yields 2.9pc.

Both have a good record of dividend growth and invest mainly in Europe and America, with some investments in Britain and emerging markets.

The pair have also significantly beaten the MSCI AC World index, a broad measure of global markets, and the FTSE All Share index, a measure of the London market, over five years.