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Rethinking UK income shares

Focus on large caps for core income holdings, but choose carefully.
Rethinking UK income shares
  • New Alpha dividend yield screens split out large caps
  • Distinguish between income and deep value plays

Our new UK large-cap income shares screen is topped by Royal Mail (RMG), which has seen its share price fall by almost a quarter in the past three months. Touted as something of a recovery story towards the end of last year, some of the froth in that story has undoubtedly been blown away. The company is still expected to have grown earnings significantly in its current financial year, but analysts are more muted with their full-year 2023 projections.  Nonetheless, thanks to the recent selling, the median forecast of dividend per share currently implies a next 12-month yield of around 6 per cent.  Growth expectations don’t point to a rising pay-out, but what is on offer is better value than it was. 

Like all companies in the defence industry, BAE Systems (BA.) is very much in the public conscience for reasons that we all wish it wasn’t given the tragedy in Ukraine. Steady, if unspectacular, earnings growth is forecast which underpins consensus for a slightly progressive dividend. BAE is rated on slightly over 14 times forecast next twelve months’ earnings, and the dividend yield of around 3.5 per cent looks reliable, albeit for now it fails our test to be among those companies forecast to raise the dividend quickly. 

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