Other funds are still worth a look

NEIL WOODFORD has given equity income a bad name, but there are still some outstanding investment funds and investment trusts available that strive to deliver an attractive income.

When Woodford Equity Income was launched in 2014, Brian Dennehy, of FundExpert, shunned it – preferring instead to point investors in the direction of alternatives such as Schroder Income and JO Hambro Capital Management (JOHCM) UK Equity Income. Both have proved superior – in terms of growing investors’ income and capital.

Today, he says there are four UK equity income funds that have grown their income in at least nine of the past ten years.

‘Dividend growth is the vital issue for most income investors,’ says Dennehy. They are BlackRock UK Income, Trojan Income, JOHCM UK Equity Income and Jupiter Responsible Income – and have respective annual dividend yields of 3.9, 4, 4.7 and 4 per cent.

Unlike income-orientated funds, stock market listed investment trusts have the ability to squirrel away some of the income they receive from holdings so it can be paid out to shareholders when dividend payments are generally under pressure – maybe because of a difficult economic backdrop.

This smoothing process has allowed many UK equity income trusts to grow their dividends going back more than 30 years.

They include City of London (managed by Janus Henderson), JP Morgan Claverhouse, Murray Income (Aberdeen Standard) and Merchants (Allianz).