Where Can Investors Find Income in the UK?

THE INCOME INVESTOR:  Defensive stocks with steady dividends have outperformed since 2007. But now these companies are more expensive than they have been for 20 years

Emma Wall 25 June, 2015 | 4:41PM
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Income investors have to be smart – finding stocks that pay-out attractive yields that don’t cost the earth is becoming increasingly difficult. Defensive slow-growing stocks with steady dividend income streams known as ‘bond proxies’ have outperformed most other UK stocks since 2007. Investors who would usually be invested in fixed income have been forced to look elsewhere for yield, pushing the price of these stocks up.

But now these companies are more expensive than they have been for 20 years says Schroder UK Alpha Income fund manager Matt Hudson, and income investors should look elsewhere.

He warns that investors chasing high yielding stocks are short-sighted, as these companies are expensive and the yields may not be sustainable. Instead, he advocates a mix of dependable payers, stocks paying low-but-rising dividends and companies which may not pay dividends now but will do in the future.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Barclays PLC200.60 GBP0.00Rating
BT Group PLC135.20 GBP0.00Rating
Lloyds Banking Group PLC48.78 GBP0.00Rating
Schroder UK Alpha Income A Inc1.49 GBP0.07Rating
Tesco PLC273.70 GBP0.00Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar