Income seekers turn to equities as interest rates freeze

UK INCOME

UK interest rates have been on hold since March 2009, resulting in poor returns for risk-averse investors.

Similarly, the yield on 10-year UK government bonds has fallen to 3.2% and yields on corporate bonds have nearly halved to 4.7%. Many income-seeking investors are turning to UK equity income funds. The UK equity market, represented by the FTSE All Share, currently offers a dividend yield of 3.3% and the potential for future dividend growth. Investors choosing equity income in today’s low interest-rate environment have been amply rewarded. The Equity Income sector rose 23% in 2009 and has made further progress so far this year. However, UK equity income investors have also suffered....