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magazineA ‘remarkable time’ to invest in UK income funds
Two new reports are offering an insight into the continuing dividend appeal of UK stocks in 2018.
The latest UK Dividend Monitor report from Link Asset Services shows British firms paid a record £94.4bn to shareholders in 2017, boosted by miners being more generous with dividends and several large one-off payments.
Underlying dividends were up 10.4% to £87.7bn which represented the fastest rate of growth since 2012.
Wealth manager Sanlam’s own bi-annual income study notes that now is a ‘remarkable time’ to invest in UK equity income funds ‘with investors having the opportunity to own many funds yielding between 4% and 6%’.
It has compiled three lists of income funds ranked according to levels of dividend income. The top-ranking ‘White List’ includes names such as Gervais Williams and Martin Turner-steered LF Miton UK Multi Cap Income (GB00B4M24M14) which has only ever occupied first place since it qualified for entry in the study.
A significant turnaround appears to have been achieved under manager Henry Dixon at Man GLG Income (GB00B0117F58) which came in at the bottom of Sanlam’s rankings in July 2016. A strong 2017 performance and a generous 5.3% yield have helped lift it onto the White List.
The middling ‘Grey List’ includes Threadneedle UK Equity Income (GB0001448900) which has dropped out of the White List.
Consistent laggards which feature once again in the ‘Black List’ include Scottish Widows UK Equity Income (GB0031643561), HSBC Income (GB0000154913) and Aberdeen UK Equity Income (GB00B0XWN812). (TS)
How does Sanlam compile its funds lists?
Starting with IA UK Equity Income sector statistics, and including only funds available to retail investors with sufficient track records and size, Sanlam undertakes a quantitative study.
It examines the previous five individual calendar years of performance, five-year levels of volatility and the total dividend income distributed over the five-year period.
Each of these metrics is weighted using a consistent formula, ranked individually, and then used to identify the funds with the best combination of performance, volatility and income paid.
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