After a decade of the capital gains-led investment focus, investors are now exploring income funds to weather the storm in global financial markets. Invesco says that cash flows today are preferable to uncertain capital gains tomorrow.

The investment management firm compares the Sharpe Ratios (a measure of returns relative to risk) since the 1950s and says that during periods of macro uncertainty and high inflation, high-yield stocks gave better risk-adjusted returns.

Over the past 10 years, bond yields have largely stayed in the negative, while equities have paid a higher yield than bonds. However, the situation is a bit different now as the dividend yield has dropped below 2% for the first time since the late 1990s. Invesco gives a chart comparing the rising numbers of non-dividend paying companies in the past couple of years.

“Investors will need to become more accepting of greater macro instability and central banks that are less willing to backstop financial markets. In the past, income has played a much greater role in returns under these conditions,” says writes Benjamin Jones, Director of Macro Research at Invesco.

The investment management firm warns that finding income funds is difficult, and screening assets on yield alone may not be the best approach as future yields may be influenced by several other factors than just macro.