Share dividends could combat inflation Go compare with our comparison table

Share dividends could combat inflation

25 November 2010 / by Paul Dicken

Dividends from stocks and shares investments could provide inflation combating investments, an investment manager has said.

Schroders Investment Management said there was potential for dividend growth over the next three years after the first market wide dividend cut in decades.

The asset manager said there was a significant income gap for people in retirement who rely on investments for income which recent research put at £160billion. This was leading people to eat into their savings and investment capital.

Co-manager of the Schroders Income Fund, Nick Kirrage, said: “IFAs (independent financial advisers) are telling us that over the last 12 months there has been a marked increase in the number of investors looking to invest for income. With equity looking increasingly attractive it is understandable that investors are turning to income funds, which provide higher income as well as the prospect of the longer term capital appreciation that savers need.”

The fund manager said certain stocks with depressed or no dividends, such as banking shares, had the potential to produce returns over the next three years. While many investors already rely on dividend income Schroders said there was an over-reliance on cash-linked investments.

Managing director of intermediary business at the company, Robin Stoakley, said: “The threat of rising inflation is a major issue facing investors, particularly those nearing or already in retirement who need to maximise their income.”

He said while a focus on bonds and their perceived safety had left equities in the shade, this was changing with certain parts of the market representing compelling value.

Kirrage said the approach of his fund was based on value and identified the ‘normalised’ profit potential of companies by looking at their history and looking at what has changed. The fund then looks to pay a low multiple of these ‘normalised’ profits to generate significant value.

“The market is obsessed with short-term profits but the true profit potential of a business is often very different from that generated in any one year,” he added.

© Fair Investment Company Ltd

 Product NameISA OptionIncome YieldMore Info
Henderson Strategic Bondyes5.7%More Info >
Income Paid Quarterly. Investing in higher yielding assets which will include most types of fixed interest securities, this fund aims to deliver a quarterly income to investors. See latest fund factsheet for details.
Newton Asian Incomeyes5.43%More Info >
Income Paid Quarterly.The objective of the Sub-Fund is to achieve income together with long-term capital growth predominantly through investments in securities in Asia Pacific ex Japan (including Australia & New Zealand) region. The Sub-Fund may also invest in collective investment schemes. See latest fund factsheet for details.
Newton Higher Incomeyes5.4%More Info >
Income Paid Quarterly. The objective of the Fund is to achieve increasing distributions on a calendar year basis with long term capital growth. The Fund may also invest in collective investment schemes. See latest fund factsheet for details.
Invesco Perpetual Distributionyes4.7%More Info >
Income Paid Monthly. Invesco Perpetual Distribution offers a balance between both income and capital growth through investment in UK based equities and fixed interest securities. See latest fund factsheet for details.
Invesco Perpetual Monthly Income Plusyes4.46%More Info >
Income Paid Monthly. Popular income fund that aims to achieve a high level of income whilst seeking to maximise total return through investing in high yielding corporate and Government bonds, together with UK equities. See latest fund factsheet for details.
Woodford Equity Income Fundyes3.50%More Info >
Our selected partner for investing in Neil Woodford's Equity Income fund is Barclays Stockbrokers, via their INVESTMENT ISA for new ISAs and ISA transfers, or their MARKETMASTER® ACCOUNT for non-ISA investments. Income Paid Quarterly.The fund’s investment objective is to provide investors with long-term appreciation through investing in stocks primarily listed on the UK stock exchanges. Up to 20% may be invested in international companies. The income objective is 10% higher than the FTSE All Share Index yield with an anticipated annual yield of 4.0%.
Newton Global Higher Income yes4.7%More Info >
Income Paid Quarterly. The objective of the Sub-Fund is to achieve increasing annual distributions together with long-term capital growth from investing predominantly in global securities. The Sub-Fund may also invest in collective investment schemes. See latest fund factsheet for details.
Jupiter Merlin Income Portfolioyes3.10%More Info >
Income Paid Quarterly. To achieve a high and rising income with some potential for capital growth by investing predominantly in unit trusts, OEICs, Exchange Traded Funds and other collective investment schemes across several management groups. The underlying funds invest in equities, fixed interest stocks, commodities and property, principally in the UK. See latest fund factsheet for details.
M&G Global Dividendyes3.27%More Info >
Income Paid Quarterly. The Fund aims to deliver a dividend yield above the market average, by investing mainly in a range of global equities. The Fund aims to grow distributions over the long-term whilst also maximising total return (the combination of income and growth of capital). See latest fund factsheet for details.
Kames Strategic Bond yes2.95%More Info >
The primary investment objective is to maximise total return (income plus capital ) by investing in global debt instruments,denominated in any currency, ranging from AAA Government Bonds through to high yield and emerging market corporate bonds. At least 50% of the fund will be invested in sterling and other currency denominated bonds hedged back to sterling. See latest fund factsheet for details.
M&G Optimal Incomeyes2.44%More Info >
Income Paid Twice Yearly.The fund aims to provide a total return to investors based on exposure to optimal income streams in investment markets. The fund invests across a broad range of fixed income assets according to where the fund manager identifies value. See latest fund factsheet for details.
*Current Income Yields are Gross, Variable and Not Guaranteed
**Historic Yield reflects distributions declared over the past 12 months as a percentage of the mid-market price of the fund.
*** This is the target yield the fund aims to achieve per year, it is not guaranteed and could change according to prevailing market conditions. The target yield is net of basic rate tax.
Information correct as at 08/02/2012.

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