Don’t give up on UK dividends
By Kristen McGachey, 8 Jul 16
From mid-caps to life insurance companies, wealth managers and oil giants, there are still plenty of opportunities for income earning post-Brexit, argue UK equity income managers.
Seek out a strong balance sheet and attractive dividend potential – Yarrow
Though co-manager of the Evenlode Income Fund, Hugh Yarrow, still maintains a preference for consumer goods and software stocks, he predicts there will be opportunities to benefit from Brexit casualties.
“We think at the margin, you are going to see opportunities in slightly more UK exposed companies. While they have become more unfashionable as a result of Brexit, some of them have business models which are very high quality,” he said.
“The key factors one should look for are a high quality business model, a strong balance sheet, an attractive dividend yield and the potential for dividend growth.”
It doesn’t matter whether a company has fallen out of fashion, said Yarrow. It’s all about a strong balance sheet and dividend growth capabilities.
“Aveva is a perfect example of that,” he said. “That was a new position for us in February. While they had a very strong balance sheet, they had some exposure to energy so they were considered unfashionable at the time.”
Despite the fact Aveva is a niche software company, specialising in building and maintaining facilities like nuclear power stations and petrol chemical plants, Yarrow thinks it is a long-term high quality investment.
There are bound to be some similar gems in the UK mid-cap sector, he said.
Tags: Blackrock | Dividend | Investec | Investment Strategy | Miton Group
