The fund focuses on the key principle of investing — namely to share in the profits of successful businesses.
In a world where investors are endlessly bombarded with news about markets and stocks it is easy to lose sight of the basic principles of investing — one of the most important is that investors receive a share of any profits a company chooses to distribute as dividends. For income investors the importance of dividends is clear, but they are just as valuable to growth investors.
Furthermore, we believe now could be an excellent time to invest. It’s easy to get extra cash from texas title loans companies. As the chart above shows, dividends from UK companies are growing strongly, and are now well above pre financial-crisis levels. Whilst the financial landscape for the UK economy is challenging, investors willing to look past the difficulties should remember many UK companies are generating healthy profits and cash flows, especially those geared to higher growth export markets. Yet share prices remain subdued, and on many measures look good value.
For investors looking to build their equity income exposure we would highlight the Thread needle UK Equity Alpha Income Fund. Traditionally, equity income funds tend to focus on the high yielding giants of the FTSE 100, but manager Leigh Harrison takes a different approach. He uses a strict stock selection process (see the facing page for a commentary on three stocks he currently favours), and won’t even consider a company that doesn’t meet his criteria. For example, he is currently avoiding 12 of the UK’s 20 largest companies. He focuses purely on his highest conviction ideas – the portfolio currently consists of just 30 stocks. Each stock can therefore have a significant impact on performance, though this also increases risk.
Long-term performance has been excellent, with the fund outperforming its sector by some margin since launch, though there are no guarantees this will continue and like all investments it can fall as well as rise in value.
Our analysis shows his stock selection has enabled the fund to hold up well during periods of market weakness.
We believe Leigh Harrison’s focused investment approach could deliver attractive returns over the long term. With a current yield of 4.6% (variable and not guaranteed), the fund could be of interest to investors looking to generate income, and for those looking to compound their wealth over the long term.