Investors should look for new 'dividend heroes'

Helen Bradshaw, Quilter Investors

Investors should be looking at the new breed of ‘dividend heroes’ as traditional UK income paying businesses suspend or scrap their dividends in the wake of the Covid-19 lockdown, according to Helen Bradshaw, portfolio manager at Quilter Investors.

Investors have seen the likes of ITV, Stagecoach and Marks & Spencer cut their dividend payments, and with the banking sector now suspending their distributions for the immediate term no sector appears to be immune from the crisis when it comes to dividends.

However, Bradshaw believes this gives investors an opportunity to look at different investment sectors in order to achieve a sustainable income yield over the long-term, allowing them not to rely solely on the traditional dividend paying businesses from the FTSE 350.
“It is not surprising that in this period of lockdown companies are looking to preserve capital, but investors need to remember not to rely solely on one sector or region for their income as it can easily be impacted by events such as these.
“While the UK remains important to investors from an income perspective with many big businesses keeping their dividend in place, they must remember that payouts here were already highly concentrated to just a handful of companies, so volatility in the markets will always have an impact.
“Just like with your overall investment allocation, your income stream needs to be diversified in order to cushion your portfolio from the impact of these cuts. There are many other sectors out there that can provide a similar yield to the FTSE 100, so having a blend of assets and geographies, including the UK, will give investors the additional benefits of dividend cover, diversification and liquidity.”