Looking for income?

As government bond yields around the world continue to tumble, with many even falling into unprecedented negative territory, it is worth reminding investors that the UK stock market provides an ideal hunting ground for those looking for a source of income.

Go to the profile of Katen Patel
Sep 06, 2019

As government bond yields around the world continue to tumble, with many even falling into unprecedented negative territory, it is worth reminding investors that the UK stock market provides an ideal hunting ground for those looking for a source of income. The UK stock market is currently one of the highest yielding stock markets globally, with a current dividend yield approaching 5%1.  The yield gap of the stock market compared to 10 year UK gilts has not been wider than it currently is for nearly 100 years! In addition, according to Liberum data (as at 09/08/19), the FTSE All Share is trading on a 2020e price/earnings ratio of 12x with almost 8% earnings growth forecast.

The UK stock market is considered to be a relatively defensive and high quality index, with many globally renowned companies choosing the UK stock market as their home; companies such as Unilever, a household product manufacturer whose brands include Knorr, Lipton, Axe and Dove, or Diageo, a global beverage manufacturer whose brands include Smirnoff, Guinness, and Tanqueray. Given the heightened volatility globally caused by trade wars, slowing economic growth and political tensions, the diverse, defensive nature of the UK stock market with the majority of earnings coming from overseas markets, should be an attraction to investors.

The JPM UK Equity Income fund is an unconstrained vehicle, which aims to provide capital growth along-side a dividend yield in excess of the FTSE All Share. The fund is actively managed and seeks out companies that have strong balance sheets and high free cash flow yields, amongst other things. The portfolio offers exposure to the attractive attributes of the index highlighted above, yet trades on a lower price/earnings ratio, a higher free-cash-flow yield and offers a forecast dividend yield of almost 5.5%2

Katen Patel is portfolio manager for the JPM UK Equity Income fund

1Source: Bloomberg as at 16/08/19

2Source: JPM as at 16/08/19 Dividend declaration and payment is not guaranteed and subject to the dividend policy in the prospectus. Forecasts are not a reliable indicator of future performance. 

 For Professional Clients only – not for Retail use or distribution

This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation, to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Past performance and yield are not a reliable indicator of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment products, there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. Prior to any application investors are advised to take all necessary legal, regulatory and tax advice on the consequences of an investment in the products. Investment is subject to documentation, which is comprised of the Prospectus, Key Investor Information Document (KIID) and either the Supplementary Information Document (SID) or Key Features/Terms and Condition. These documents, together with the annual report, semi-annual report and instrument of incorporation are available free of charge from JPMorgan Asset Management (UK) Limited. This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 0903c02a82694ff4

Go to the profile of Katen Patel

Katen Patel

Fund Manager, J.P. Morgan Asset Management

Katen Patel is portfolio manager of the JPMorgan Mid Cap and JPMorgan Smaller Companies Investment Trusts, as well as the JPM UK Smaller Companies Fund within J.P. Morgan Asset Management's UK Equity team.

No comments yet.