To amend a slogan from the Bill Clinton presidential race, it's the global equity dividend, stupid.

So says UK-based investment house Sarasin & Partners, which argues that global dividends are increasingly valued by clients left chastened by big stock market swings, overvalued bond markets and fears about the capital-eroding impact of inflation.

An analysis of large companies around the world shows firms have plenty of cash to fund dividends as a result of cost cuts, Sarasin & Partners says. Meanwhile, there has been a sharp recovery in corporate profits since markets recovered a year ago, to an extent that surpasses the rebounds seen in the aftermath of previous economic crises in the 1930s, 1970s or late 1980s, Guy Monson, chief investment officer and managing partner at Sarasin & Partners, told a briefing for journalists yesterday.

Sarasin & Partners is part-owned by Banque Sarasin, the Swiss firm, and Rabobank, the Dutch bank.

With inflation threatening to erase meagre returns from cash products and fixed income portfolios – headline UK consumer price inflation hit 3.5 per cent in January – equity income, the investment style that stresses dividends, is gaining adherents. Cash flows into the top 20 UK and international equity income funds reached £433 million in January this year, Sarasin & Partners says, citing data on the UK market from Financial Express Analytics.

With dividends becoming more significant in such a climate, Sarasin & Partners, like some of its peers, offers equity income funds as part of its suite of products. However, the UK investment house argues that it makes particular sense to hold a global, rather than regional, equity income fund to avoid the distortions that can arise with a fund focused on just one country.

The distortion is particularly acute in the UK, where the 10 largest firms – companies such as the oil giant BP and telecoms titan Vodafone - account for more than 60 per cent of all the dividends paid by firms listed on the FTSE All-Share index. BP, for example, accounts for 12.6 per cent of all dividends paid in that index over the previous 12 months. The concentration is far less marked in the US equity market: the 10 biggest US firms account for less than a third of all dividends paid out.

Economic forecasts suggest, Mr Monson says, that it is best to avoid the UK to acquire the highest dividends, noting that dividends in the Europe ex-UK region are expected to grow by about 15 per cent this year, but by only about 9 per cent in the UK this year.

As far as the strongest dividend growth is concerned, “the leadership is coming primarily from the developing world” Mr Monson said. Meanwhile, even those sectors which have traditionally focused on capital, not dividend growth, are getting into the dividend-payment habit, such as Microsoft and IBM, he noted. IBM, for example, raised its dividend by 25 per cent. Shareholders of Novartis, the Swiss pharma firm, have voted for a proposed 25 per cent dividend increase for 2008.

The Sarasin International Equity Income Fund, which has been managed by Mark Whitehead since September 2007, currently pays a yield of 4.8 per cent, comparing favourably, Sarasin says, to many of its peers, such as the Jupiter Income Fund (4.4 per cent), JOCHM UK Equity Income Fund (4.5 per cent), although it is surpassed by the Threadneedle UK Equity Income Fund (5.1 per cent).

In terms of overall returns, the fund, like many of its peers, has lost ground, however. Returns have been negative in the three years to 30 September 2009, at -6.9 per cent, but better than the 12.9 per cent median loss for the sector, according to figures from Standard & Poor’s in a report issued in January.