View the article online at http://citywire.co.uk/wealth-manager/article/a744279
Love to hate: top managers' favourite unloved dividend stocks
by Eleanor Lawrie on Apr 02, 2014 at 10:34
As yield becomes harder to find in the overfished traditional dividend-paying sectors, investors are increasingly turning to the unloved areas of the market that look ripe for a dividend increase.
Economic headwinds such as the regulatory pressures on the tobacco and banking sectors, along with weakness in demand for commodities and retailers have revealed opportunities for bold investors.
‘Complacent UK equity income investors could find themselves missing diverse income opportunities in non-traditional sectors,’ said Citywire AA-rated JPM UK Higher Income fund manager Thomas Buckingham.
His £313.2 million fund is yielding 3.6% and its biggest play is an 8.8% overweight to financials. Within that sector, Buckingham is excited about UK banks.
‘From an income investor’s perspective, UK domestic banks can once again be seen flashing on the radar screen,’ he said.
While the banking sector has taken a sustained break from dividend payments, the manager argued that ‘this picture is changing,’ as some take positive steps toward improving their balance sheets.
In particular, Buckingham is positive on Barclays and Lloyds because they have made good progress in their asset reduction programmes, with the former disposing of its stake in BlackRock and the latter selling Scottish Widows Investment Partnership.
‘With vast improvements in capital positioning and balance sheet strength, both companies seem destined to improve their dividend paying attractions in the short to medium term,’ he said.
Barclays, in particular looks set to ramp up its pay outs soon, with the market expecting a yield of close to 4% this year, rising to 5.5% in 2015, Buckingham added.
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