In the back
[ STOCKPICKER ]
54 / 55
The low esteem in which
global investors hold the
UK has thrown up decent
opportunities for income
seekers willing to ride out
Brexit jitters
Laith Khalaf, senior analyst at
Hargreaves Lansdown, highlights
three stocks with steady if
unspectacular dividend yields
that have the potential for growth
Solid
foundations
The low esteem in which global
investors hold the UK has thrown
up decent opportunities for income
seekers willing to ride out Brexit jitters.
The typical FTSE 100 stock now offers a
yield above 4 per cent.
A high yield is not necessarily a
kitemark for success, however, and as
recent dividend cuts from Vodafone
and Royal Mail have demonstrated,
sometimes it is a sign of distress.
The flip side is that lower-yielding
stocks can be attractive income plays
for patient investors because of the
potential for dividend growth.
P
roducing a decent income
from a stock portfolio is the
holy grail for many investors.
That applies in spades in today’s
world where people have full control
over their pension pots and yet loose
monetary policy has pushed the yield
on cash and government bonds below
the rate of inflation.
British Land, one of the
UK’s biggest commer-
cial property landlords,
has seen its share price
fall by a third in the last
three years on concerns
over demand for retail
and office space. The
company has exposure to
struggling retailers such
FE TRUSTNET
as M&S and Debenhams,
but it has a long list of
more stable tenants such
as Facebook, Tesco and
the UK government. Its
stock now trades at a 30
per cent discount to the
NAV of its property portfo-
lio, but with a prospective
yield of almost 6 per cent,
shareholders are being
paid to wait for an im-
provement in sentiment.
Insurance isn’t the most
exciting industry, but it
can be a lucrative one,
and Legal & General has
carved out market-leading
expertise in key areas. One
of these is de-risking final
salary schemes in the UK,
a service it is now expand-
ing into the US, while
pension auto-enrolment
has also created a wave
of new retirement savers
at home, where L&G is
one of the major players.
Increased investment in
low-cost passive funds is
another growth market,
where it stands toe-to-toe
with American behemoths
BlackRock and Vanguard.
The cherry on top is a yield
of more than 6 per cent.
interest rates, which have
pushed bond investors
into stocks offering reliable
On a typical day, 2.5 bil-
dividend growth. Unile-
lion people use a Unile-
ver’s market premium has
ver product, from Cor-
fallen back in the last few
netto ice creams to Persil
years, and while not cheap,
washing powder. That
it is now more modestly
scale and the strength of its priced. A yield of 3 per cent
brands have made Unile-
is below the market aver-
ver a stock market darling. age, but its growth pros-
The share price has ben-
pects mean that, over time,
efited from rock-bottom
it can play catch-up.
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