Five top-performing UK income funds yielding more than the FTSE
FE Trustnet looks at five UK Equity Income funds that offer the best of both worlds for investors seeking growth and a regular earnings stream.
When selecting an equity income fund, investors look at both its yield and the capital growth it provides.
Sometimes the highest-yielding stocks are unattractive because the underlying company may have little expectation of growth or of being able to maintain or raise the dividend in the future.
Star manager Neil Woodford’s Invesco Perpetual High Income fund provides a yield of just 3.81 per cent, for example, putting it in the bottom quartile of the IMA UK Equity Income sector for this measure.
Research from Capita Registrars published yesterday
suggests the FTSE is set to yield 4.4 per cent this year - so here FE Trustnet
looks at five funds that have both yielded more than this and provided top-quartile growth.
JOHCM UK Equity Income
Overweight positions in the non-banking financial sector have helped this fund provide a historic yield of 4.6 per cent, while also producing top-quartile returns over three and five years.
Financials have been increasing their payouts the fastest this year, according to yesterday’s research from Capita Registrars, and JOHCM UK Equity Income has 34.2 per cent in this sector compared with the benchmark’s 20.3 per cent.
The fund holds Standard Life, RSA Insurance and 3i in its top-10, as well as troubled bank HSBC.
Performance of fund vs sector and benchmark over 5-yrs
Source: FE Analytics
The managers have increased their projection for 2012’s dividend growth to between 7 and 9 per cent and in their note for June pointed out that many of their stocks yield more than their equivalent seven- to 10-year corporate bonds.
The fund is available with a minimum investment of £1,000 and has a TER (total expense ratio) of 1.32 per cent. However, it does charge a performance fee of 15 per cent on anything delivered above the benchmark over a one year period.
Fidelity Moneybuilder Dividend
Five FE crown-rated Fidelity Moneybuilder Dividend has a historic yield of 4.57 per cent and has produced top-quartile returns over three years, growing capital by 51.28 per cent over this period.
FE Alpha Manager Michael Clark has 8.5 per cent of the fund in GlaxoSmithKline, which returned £277m to investors in a special dividend earlier this year after a sale of some of its US business.
This holding helped the fund post strong figures for 2012, with the portfolio offering top-quartile gains over one year and six and three months.
The fund has a minimum investment of £1,000 and a TER of 1.2 per cent.
CF Liontrust Macro Equity Income
FE Alpha Managers Jan Luthman and Stephen Bailey have run this fund since launch in 2003, returning 121.65 per cent since this time.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
The fund aims at providing a rising level of income as well as capital growth and has a historic yield of 4.8 per cent.
The managers have 16.9 per cent of the fund in Pharmaceuticals & Biotech, one of the strongest sectors for dividends over the past year.
A 4.8 per cent weighting to Vodafone, one of the biggest dividend-payers of 2012, also contributed to the fund’s good performance.
It has a minimum investment of £1,000 and a TER of 1.56 per cent.
Threadneedle UK Equity Alpha Income
Richard Colwell and FE Alpha Manager Leigh Harrison have produced top-quartile returns over one, three and five years, and have done so with a historic yield of 4.8 per cent.
The fund has almost doubled in size since December 2010, reaching £260.1m at the end of June.
It has a minimum investment of £2,000 and a TER of 1.63 per cent.
Henderson UK Strategic Income
Paul Craig’s fund, which invests predominantly in investment trusts, suffered in 2008, falling by more than the rest of the sector.
However, in the past three years it has staged a recovery and its 49.87 per cent returns over this period put it in the top quartile of the sector.
It has a historic yield of 4.6 per cent and a £1,000 minimum investment. Its TER is 1.68 per cent.