Page 7 - DIY Investor Magazine | Issue 38

THE YIELD FOR THE FTSE ALL SHARE IS CURRENTLY 3.7%, WHICH PUTS IT SIGNIFICANTLY AHEAD OF MOST MAJOR MARKETS
PREMIUM DIVIDEND
The UK has a long-established and well-developed dividend culture. While other countries have improved their payouts to shareholders in recent years, few can match the track record of UK companies. The yield for the FTSE All Share is currently 3.7%, which puts it significantly ahead of most major markets. The S&P 500, for example, yields just 1.7%.
This premium has always existed, but is particularly high today as poor sentiment towards the UK has depressed share prices (yields are expressed as a percentage of the share price). The yield premium is now at its highest point for the last 15 years.
Equally, dividend cover looks healthier than it has for some
time. The pandemic allowed many companies to re-set their dividends to more realistic levels. Aggregate dividend cover – the amount of profit a firm makes divided by the dividend it pays out – for the FTSE 100 is now more than 2x, having been below 1.5x as recently as 2016.
It is also worth noting that UK investors in global equity income funds will usually see a drag from withholding tax. This lowers distributable income for overseas-listed investments, but has no bearing for investments in UK-listed companies.
‘HIGH AND GROWING INCOME COMBINED WITH CAPITAL GROWTH’
GLOBAL TRENDS
The UK market is often seen as old-fashioned, stuffed with yesterday’s companies in mature, low-growth industries such as banking and fossil fuels. This may be true of the UK’s largest companies, but looking beyond the mega-caps, there is an increasing range of companies exposed to exciting global themes, such as digitalisation, the energy transition and emerging global wealth.
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Aug 2023
DIY Investor Magazine ·
Equally, where there are gaps, these are readily plugged.
At Murray Income Trust, 20% of the portfolio can be held in overseas-listed companies. This allows us to fill any holes in our exposure or diversify risk in concentrated sectors.
At the moment, that exposure includes high quality companies such as Microsoft (Artificial Intelligence), Kone (elevators), Novo Nordisk (diabetes and weight loss), Accton Technology (network equipment), LVMH (luxury goods), VAT Group (semiconductors) and L’Oreal (cosmetics).
In short, if Murray Income Trust were a global income fund focused on high quality businesses, it would look extremely similar to its current make-up.
In achieving the aim of a high and growing income (Murray Income Trust is approaching 50 years of consecutive dividend growth) combined with capital growth, the UK market serves us very well.