Could 2014 be a good year for income investors?
New figures from data analysis group Markit suggest UK companies could increase their dividend payouts by 4.5% to £72.4bn this year.
This would represent the slowest rate of dividend growth since 2011, but should still grow faster than price inflation by a predicted 2.1%.
The research from Markit identified the oil and gas sector as one with the best prospect for dividend growth in 2014, with £12.8bn of the expected £72.4bn dividend payments this year coming from this sector.
BP and Shell are each expected to pay investors £4.4bn of dividends in 2014, with the former planning to sell assets worth £6bn and return most of this cash to investors.
Another £9bn of dividends is expected to be paid out by the UK banking sector, according to Markit, with Lloyds Banking Group planning to return to paying dividends after five years away from this practice.
Investors seeking income have traditionally held UK equities in their portfolios, due to their history of paying a growing dividend and returning value to shareholders in this way.
Despite the expectations outlined in this blog from Markit, it is important for income seeking investors not to neglect other investment asset classes which can also contribute to a well diversified income portfolio.
UK commercial property for example has an average yield of 6.18% currently, according to the IPD, far exceeding that available from equities or fixed interest securities.
We tend to find the best income portfolios are well diversified and hold several asset classes, which helps to reduce the capital risk while still creating the opportunity for reasonable income yields.
