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Global income in a lost decade for UK dividends

Investment Trust Insider on Perpetual Income and Growth

Global income in a lost decade for UK dividends

by Jennifer Hill
Investment Trust Insider ezine, issue 54, June 2020

Bear markets for dividends are a rarity. There have only been six in the past 149 years compared to 16 for total stock market returns, according to an analysis by Schroders that uses the S&P 500 index in the US as a barometer.

However, they have historically lasted much longer – 4.8 years on average compared to 1.5 years. That makes sense: share prices react in advance of economic improvement whereas dividends pick up after companies’ financials improve…

The UK is a highly concentrated market. Historically, half of FTSE 100 income has come from the ten largest stocks. Many are exposed to areas of the market that are cyclical, notably financials and energy. Banks have scrapped dividends after being asked to preserve capital to support the economy, while Royal Dutch Shell has cut its dividend for the first time since the second world war following the collapse in global oil demand.

Charles Stanley analyst Adam Carruthers believes many British businesses have been paying too much in dividends rather than re-investing for the future – a ‘reversion to the mean’ for UK dividend payers may not happen…Myriad investment trusts generate good and growing levels of income beyond the UK stock market – from global equity income strategies to regional and sector-specific trusts. Here are analysts’ and wealth managers’ eight top picks:

NORTH AMERICAN INCOME TRUST

James Carthew, head of investment company research at QuotedData, favours North American Income Trust (NAIT), which yields 4% from predominantly S&P 500 constituents, paid quarterly…

JUPITER EMERGING & FRONTIER INCOME

In mid-May, the board of Jupiter Emerging & Frontier Income (JEFI) said prospects for underlying earnings remain good. ‘It’s confident enough to say that it will at least maintain the dividend for the year to 30 September 2020,’ said QuotedData’s Carthew

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