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Martin Cholwill's six top niche UK equity income ideas

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by Eleanor Lawrie on Mar 18, 2014 at 13:30

Royal London Asset Management's UK equity income AAA-rated star reveals six of his best ideas beyond the mainstream.  

Martin Cholwill

Citywire AAA-rated Martin Cholwill has run the £954.7 million Royal London UK Equity Income fund since 2005. In three years the fund has returned 65.2%, compared ith a return of 36.3% for the FTSE 350, while in five years it has returned 180.5% compared with 112.2% for the index.

The fund invests solely in high yielding UK stocks, with an emphasis on sustainable dividends. Here he reveals six of his best ideas.

Ricardo

Environmental legislation for emissions is driving growth for this engineering consultancy. Many car companies now contract out a higher proportion of their R&D than before the credit crunch. Ricardo has a strong market position and has delivered real value to its clients.

Spirax Sarco

A company with a 15% global market share in products and services that optimise industrial steam processing. It is as large as its next four competitors combined, putting it in a very strong strategic position to sustain its record of delivering year-on-year dividend growth.

BBA Aviation

An aviation services company whose market is growing faster than GDP and will benefit as the US economy recovers. There is scope to bolster its market position through further acquisition.

Restaurant Group

An organic growth story with a strong roll-out programme of its restaurant formats, which is delivering a consistently high return on investment. Its strong balance sheet and consistent cashflow support sustainable dividend growth.

WH Smith

A story of strong cashflow and capital discipline, with organic growth in its travel business and strong cashflow from its mature high street operation. A recovery in airline travel could help provide a cyclical kicker to organic growth rates in its travel business.

Investec

An unloved business with a strong wealth management operation, whose shares are very cheap on a sum-of-parts basis. A strategic review may result in it selling the weaker parts of its banking operation, resulting in a bank with a high return on equity and realising value for shareholders.

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