UK Income strategies are under pressure as companies cut their dividends. This strategy is no different, 26% of its holdings have suspended dividends, 18% cancelled, 8% cut and the balance are still paying. Overall, they believe they will see a 35% decline in the income payments from the fund which will be better than market. It has helped that the fund is underweight banks and oil majors compared to the index.
The fund is an all cap strategy but is weighted more towards the FTSE 100. In the short term the considerations are on liquidity/balance sheets, dividend cuts, exit strategies (from lockdown), unemployment and oil price. The major focus long term is on debt and where companies are currently under pressure to cut dividend, it is whether they re-instate in the future.
This year the team have been more active; some of the winners for the fund have been IG Group, Schroders, Unilever, RELX and Rio Tinto. The holdings which have hurt the strategy include Carnival, Land Securities, Informa and Vistry Group. Carnival was added in December on the back of the growth of the industry and demographics. The decision to sell was based on the fact that this will be impacted for a long period of time and therefore it was no longer viable to hold….read more