Smaller firms give diversification and dividend benefits

ON UK INCOME

Dunedin's Ed Beal believes the ability for small companies to translate profit streams into dividends is often overlooked.

Investors often think of the attractions of small companies solely in terms of capital appreciation. While it is true they can be expected to grow their earnings more rapidly than their larger counterparts, the ability to translate this profit stream into dividends is often overlooked. The dividends paid by small companies also impart a number of diversification benefits. Firstly, there are no companies or sectors that are disproportionately important contributors to the overall pot of income. Therefore, we are unlikely to experience a reduction in dividends as a result of a single ec...