UK dividends set to rise
New research by Capita Registrars suggests that UK dividends are set to rise by 13.6% in 2011.
This means that UK firms are likely to pay dividends of £64.2bn to investors this year.
Whilst still below the record £67.1bn of dividends paid out in 2008, this predicted increase represents good news for investors who are struggling to achieve reasonable yields in a low interest rate environment.
The turnaround in dividend payments this year has been prompted in part by the payment of a special dividend by International Power and the resumption of dividend payments by BP.
Five companies – AstraZeneca, Vodafone, Shell, International Power and HSBC – made up 51% of all of the dividends paid during the first quarter of 2011.
Investors searching for yield should consider spreading their portfolio across a variety of asset classes, rather than focusing solely on UK equity income.
Whilst the outlook for fixed interest securities is less attractive in our opinion than that for UK equities, due to current levels of price inflation and prospects for interest rate rises later in the year, it is the interaction between the two asset classes which results in important risk reduction characteristics in a portfolio.
Investors should also consider an element of commercial property within their portfolios. This continues to deliver an attractive yield compared to cash and is also important as an asset class displaying negative correlation with other types of investments.
Income investment portfolios need to be actively managed in the current economic environment and should be regularly reviewed to take into account the changing market outlook.
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