UK INCOME: Valuations attractive as UK firms return to dividend-paying list

After a difficult 2009, 2010 has started well with many firms growing their dividends by more than expected.

As a result, several companies have returned to the dividend-paying list and we have seen the likes of HMV go to a 10% yield, yet remain committed to paying a dividend. This change was driven by a better-than-expected corporate results season, following the aggressive cost-cutting measures taken last year. Overall, we expect to see dividend growth for 2010 to come in at about 5%. Another reason for optimism comes from the dollar. Year to date, it has fallen from $1.65 to $1.50 vs sterling (1 January to mid-March), which has been beneficial to dividends. This is because approximately h...