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Funds for the UK dividend recovery

When selecting funds for a dividend recovery it makes sense to have exposure to different investment styles and market cap sizes
Funds for the UK dividend recovery
  • With a dividend recovery on the cards a number of UK equity income funds are showing promise
  • There is no certainty the strong run for cyclicals will continue so exposure to different investment styles and market cap sizes seems sensible
  • The options available vary significantly

Say it quietly, but dividend hunters in the UK might finally be able to be optimistic. After a brutal 2020, a recovery of sorts seems to be on the cards: the Janus Henderson Global Dividend Index report for the first quarter of 2021 notes that the UK dividend market has shown “signs of revival”, even if the effect of last year’s cuts and the permanence of some reductions will weigh on the yield available.

Link Group, which conducts its own dividend research, expects headline dividends for 2021 to rise by 17.2 per cent to £74.9bn in its best case scenario, thanks to payouts from Tesco (TSCO), and mining stocks BHP (BHP), Rio Tinto (RIO and Ferrexpo (FXPO). If this scenario materialises, Link expects UK stocks to yield an underlying 3.1 per cent for the year, falling to 3 per cent if its worst-case scenario plays out.

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