The search for income

Trends in the UK equity market can determine how to construct a portfolio with the best yield

Various academic research materials suggest companies that pay and grow their dividends tend to outperform over time. This is largely because these types of companies tend to be well established, have clear business models, strong barriers to entry and sizeable cashflow generation. Often they are described as defensive and, like the events of 2008, typically command a premium in times of equity market volatility. As such dividend yield and dividend growth have been shown to be the key long-term drivers of equity returns, with the added power of the compounding effect when investing in ac...