Morningstar's Guide to Income Investing

Is your portfolio earning you the best possible rate of income? Are you prepared for this year's interest rate rise? We show you how to maximise yield and where to find dividend payers

Emma Wall 8 February, 2016 | 8:21AM
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Incomes seekers, there is light at the end of this very long tunnel. Yield hunters have spent the best part of a decade in unaccommodating climes; seven years of record low interest rates on cash, falling bond yields and – post financial crisis – fewer big banks and retail stocks paying dividends.

But now the tide has turned and the Federal Reserve has raised interest rates. It was a long time coming and it will be a long time in the execution too, if market volatility continues. As while the Fed is sticking to its guidance of four rate rises in the next 12 months, many economists are more bearish. In the six weeks since Janet Yellen and her fellow members raised rates across the pond, the global outlook has already shifted significantly, thanks in the most part to uncertainty surrounding China and commodity prices.

Last month Bank of England Governor Mark Carney said that “now is not the time to raise interest rates”.

He continued: “Due to the oil price collapse, inflation has fallen further and will likely remain low for longer. “It has always been the case that, because the economy is subject to unforeseen disturbances, the precise path for Bank rate rises cannot be pre-ordained."

Rather an about-turn from a man who introduce forward guidance in the summer of 2013 to do just that.

But while now may not be the time, this is most probably the year, and investors should begin preparing for the eventual inevitable. Bonds are the obvious weak spot in any portfolio should rates rise, long-only funds are bound to take a hit. With equities it is all about making sure the price is right, many dividend aristocrat stocks both in the UK and the US are looking overvalued, their share price pushed up by demand. And while interest rates may not yet have risen in the UK, you have only two months left to use up this financial year’s ISA allowance, so make sure you lock cash in at the most generous rate.

All these quandaries and more are answered this week as Morningstar runs a Guide to Income Investing.

Monday: Home-grown Stocks

Domestic equities – who is paying out the biggest dividend now and in the future?

Top 20 FTSE 350 Dividend Stocks

Top 20 FTSE 100 Dividend Payers

What Stocks are the Top Fund Managers Buying?

3 Undervalued Income Stocks

UK Stocks Best Performing in January

Tuesday: International Equities

Stocks from developed and emerging markets offering an attractive yield

3 Global Stocks for Dividend Growth

Top Rated Investment Trust Grows Dividend for 50 Years

Income Stock Tips from a Silver Rated Fund Manager

Finding Income in a Troubled US Market

3 Top Rated Global Equity Income Funds

Is Income Investing in Emerging Markets Worth the Risk?

Wednesday: Bond Investing While Yields Fall

How can you add portfolio diversification without losing cash?

Which Bonds Deserve a Place in Income Investors' Portfolios?

Gilt Yields Fall as Equities Prove Unpredictable

Bond Investors Find Opportunities in Reforming Countries

3 Bond Funds to Profit Through the Uncertainty

L&G All Stocks Index Linked Gilt Index Downgraded

Thursday: Income from Alternatives

Property? Commodities? Derivatives? Alternative ways to boost income payouts

Energy Funds Exposed to the Oil Price for Bold Investors

Rising Rates Good News for Property Investors

Gold Price Will Fall Below $1,000 and then Rise Over Decade

4 ETFs for Picking Up Cheap Gold

Friday: Income in Retirement

Multi-asset funds annuities and stock picks

Multi-Asset Income Funds: What Do the Experts Think?

Hobson: Don't Forget Dividends You're Losing Share Gains

3 UK Income Stock Picks for Dividend Growth

Woodford Funds: Energy and Telecom Dividends at Risk

Why You Should Still Consider an Annuity

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Wall  is former Senior International Editor for Morningstar

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