UK markets provide dividend promise to investors

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UK markets provide dividend promise to investors

Investors seeking income from dividends are still best placed to do so in the UK, advisers believe.

 

Research carried out by FTAdviser Advantage has revealed advisers favour the UK equity income market over and above those of the US or Asia.

Global companies have been showing positive dividend growth, with 49 per cent of companies listed on the US S&P 500 paying more than 2 per cent in dividends, for example, and prospects in Asia appearing strong.

At a Morningstar conference in London earlier in September, fund managers told delegates that dividend yields from Japanese stocks are even higher than those offered by the S&P 500 – and they will continue to rise.

There are going to be demands for significant increases to cash funding of pension schemes. This will not be good news for share prices or dividends  Charles Cowling

But despite this, many advisers still believe the UK offers the best prospects for dividend growth.

In a poll of advisers by FTAdviser Advantage, 46 per cent of financial advisers believed the UK equity income market was the most promising for investors hungry for income.

 

Only 9 per cent would head further afield, to Asia, for income growth.

Certain stocks look particularly attractive for dividend growth. For example, the UK-based The Share Centre marked Saga as a buy, following its announcement earlier this year of an improved dividend policy.

However, following the Bank of England’s decision to hold rates at 0.25 per cent last week, Charles Cowling, director of JLT Employee Benefits, said we could see a knock-on effect on dividends later on in the year.

He commented: “With little sign that Brexit is having an effect on inflation just yet, there is no pressure on the Bank of England to raise interest rate rises.

“If markets are to be believed we could see interest rates stay at current record lows for the next 5 years, which is not good news for pension schemes.

“This means there is no respite in sight from the record pension deficits caused by the Bank’s interest rate policy. As a result, there are going to be demands on employers for significant increases to cash funding of pension schemes. This will not be good news for share prices or dividends.”