One avenue would be to look at funds that invest in the solid, blue chip companies that are known for generating steady and rising dividend payments. Regrettably, as conventional funding sources have seized up, and balance sheets need shoring up, many of these businesses are either sharply cutting their dividends, or eradicating them altogether. There is also the small problem that, after the collapse in asset values, many investors would rather stuff hedgehogs down their trousers than hold company stocks.
But the UK stockmarket appears to be on a roll, and some funds are managing to negotiate the territory more or less successfully. Financial Express research shows which of the IMA's UK Equity Income sector constituents have generated superior levels of income and, even, advanced in terms of total return. We shall come to that in a moment.
First, the risk factor: volatility does not have to be off-putting, since most investors are in this sector for its longer-term income-producing features. But it is as well to be aware that among those funds that are producing yields of more than 5 per cent - and there are 44 of these to choose from - the range of volatility starts at 19.3 per cent and in the worst case reaches an eye-watering 32.7 per cent.
So, this sub-group is capable of doing considerably better than the High Street savings deals, but investors should be clear about its nature. One does not get into this area for the double dip of a handy income and then a chunky capital payback at exit time. Income is the name of the game.
If we can identify 44 funds that meet our yield criterion, it is worth examining some of their vital statistics. At entry level, L&G's Barclays-flagged UK Equity Income fund would have produced a running yield of 5 per cent. The fund also manages to stay in positive territory when it comes to total return, logged at 5.8 per cent over the year to 27 September, so its investors are drawing income without any damage to the underlying capital. This does not take account of the effects of inflation, of course.
Top 5 performing funds by yield (IMA UK Equity Income sector)
| Name | Yield | 1-yr Cumulative Performance to Last Price |
| New Star - Higher Income TR |
10.1 | -6.35 |
| New Star - UK Strategic Income TR |
9.8 | -11.87 |
| Liontrust - First Income TR |
7.94 | -2.15 |
| Aberdeen - UK Equity Income TR |
7.63 | 2.94 |
| Aberdeen - Income TR |
7.17 | 3.74 |
Where investors would encounter the trade-off between the income and capital performance is in New Star's Higher Income fund. This delivers a handsome yield of 10 per cent, but then posted a 6.3 per cent negative total return for the 12 months to 27 September 2009. It has to be said also that the fund's risk measure sits at the knuckle-whitening end of the scale, with volatility of 32.7 per cent.
The various elements do come together in a kind of harmony, though, when we look at Schroder Income Maximiser. Not only does this fund deliver a yield of 12.3 per cent, it has also logged a gain in total return of 16.8 per cent. In relative terms, the fund's 22 per cent volatility is in the bearable part of the spectrum, and a Financial Express 3 Crowns rating attests to the consistency of its risk/reward characteristics over time.
Way to go.