One of the biggest risks facing income investors today is yield concentration. Nowhere is this more of a concern than in the UK market, where around 40% of the dividends paid by FTSE All-Share listed companies come from just five businesses.
What is more, this top five includes multiple dividend payers from the same sector (energy), highlighting an additional layer of concentration risk. Income-hunting investors focused largely on the UK are precariously dependent on the fortunes of a very select set of companies and industries. Is there a solution for UK income investors? Let us be frank: true diversification is difficult to uncover while remaining solely invested in the UK market. Spreading investments across multiple products cannot solve the concentration problem - the majority of UK equity income funds are invested in t...
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