Building the Ideal Income Portfolio

The current investment climate is tough for those seeking an income from their savings. We talk to leading income investors about how they construct their portfolios

Danielle Levy 11 October, 2016 | 11:15AM

Dividend cover amongst some of the UK’s best-known income stocks has reached worryingly low levels.

Ideally, investors like dividends to be covered by more than two times forecast earnings to feel that a company can comfortably pay out a dividend. However, data from broker AJ Bell shows that dividend cover across almost half of FTSE 100 companies is below this level, with 1.47 representing the average level. For the 10 highest-yielding FTSE 100 stocks, average dividend cover was even lower at 1.22.

This serves as a reminder that investors cannot always rely on FTSE 100 names to deliver the income they need. It also shows that investing for income is as much about avoiding dividend cuts as it is about picking stocks that can successfully grow their dividends over time.

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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.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
AstraZeneca PLC7,300.00 GBP0.00
AVEVA Group PLC5,285.00 GBP0.00
Berkeley Group Holdings (The) PLC5,324.00 GBP0.00
GlaxoSmithKline PLC1,668.60 GBP0.00
Halfords Group PLC163.00 GBP0.00
Howden Joinery Group PLC727.60 GBP0.00
Rathbone Income R Acc1,645.36 GBP0.69
Reckitt Benckiser Group PLC6,338.00 GBP0.00

About Author

Danielle Levy  is a freelance journalist specialising in investment writing for Morningstar.co.uk

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