Avoid high street retailers

ON UK INCOME

Old Mutual's Stephen Message believes high street retail businesses have a tough future ahead as they face stiffer competition from low-cost online retailers.

When assessing potential core income investments in the portfolio, we are attracted to those companies that can sustainably grow cashflow in the medium to long term. The question is: how do we identify these companies? Businesses generally tend to increase dividends with rising profits. Balance sheet strength and future investment requirements will also be considered. Those firms in strong competitive positions, having a greater ability to sustain or grow profit margins, are also in a better position to grow cashflow. Examples within the portfolio include Restaurant Group and utility bus...