The boring, ugly and unfashionable

Fund manager's comment

Last year was rewarding for UK equity income managers, who consolidated gains made the year before a...

Last year was rewarding for UK equity income managers, who consolidated gains made the year before and partly made up for the disappointments of the previous two years. The rise of the FTSE All-Share from its low point in March 2003 has helped to diminish pessimism. We measure this pessimism - or over reaction - by its dividend yield, and whether this will provide adequate compensation for its uninspiring prospects. We grade stocks as ugly, boring and unfashionable. To qualify for the first category a stock must yield 2% over the long-dated gilt. If government bonds yield about 4.5%, ugl...