Holly Cook: We've been looking at income this week and I'm joined today by Mark Preskett. He is an Investment Consultant for Morningstar Investment Management Europe and he is involved in constructing model portfolios that are sold through our Workstation software.
Thanks very much for joining me, Mark.
Mark Preskett: Thank you.
Cook: So, in our focus on income, you’ve been looking specifically at equity income funds. From an investor's point of view, what can they expect in terms of how the dividend, how that income is actually distributed to them?
Preskett: Most fund groups set up their funds to distribute dividends annually or semiannually. If you look down the UK sector, there is about a quarter that do actually distribute more frequently, which is on a quarterly or even a monthly basis.
Cook: So what are the benefits of getting that distribution more frequently?
Preskett: For an average investor, if they're relying on that income stream to live, then it's much easier to manage your finances when the dividends are coming more frequently.
Cook: Okay, and so if you're an investor who is interested in trying to access this income or build this income in their portfolio via funds, what are some of the funds out there that we like?
Preskett: So on the UK side, there's several funds that distribute quarterly. A couple that we really like are the Threadneedle UK Equity Income fund and the BlackRock UK Income fund, both are Silver-rated by our analyst team and both provide a very attractive yield. The Threadneedle fund has yields over 6%, whilst the BlackRock fund yields about 4.5%.
Cook: So compared to what you could get from a UK Government Bond, that's really attractive.
Preskett: Absolutely. Most bond investors price their funds off a 10-year government bond. At the moment, that's yielding less than 2%. So, there isn’t much comparison really.
Cook: So if an investor wants to look beyond the shores of the UK, they want to see what opportunities are available on a global equity point of view, what are some of the funds there that we’ve looked at?
Preskett: Well, globally, there's more and more companies out there that are paying dividends and paying a decent dividend. So we've got – there is two funds that stick out, that are both Silver-rated, that’s M&G Global Dividend fund and Newton Global Higher Income fund. The yield on the Newton fund is actually over 5%, whilst the M&G Fund has a yield of over 4%.
Cook: Well Mark, thanks very much for joining me.
Preskett: Thank you.
Cook: From Morningstar, I'm Holly Cook. Thanks for watching.