Waiting for a large cap re-rating

EQUITY INCOME

In the final part of our series on equity income, Colin Morton, manager of the Franklin UK Equity Income fund, explains why he is backing large caps as he steps into 2014.

Looking to 2014, income investors face a familiar and difficult landscape. Since November 2008, when rates began to free-fall from 3%, asset classes such as gilts and cash have been eroding capital. With the base rate at a historic low, and the current yield on 10-year gilts at 2.77%, income-hungry investors will need to look at alternative streams of income if they are to achieve a positive real return after tax and inflation. By examining historical trends, UK equity income has shown to be a good weapon against low interest rates and inflation this year. The FTSE yield is currently ...