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&#39Equity income is set for continued success&#39

New Star income fund manager Toby Thompson has hit back at claims that equity income funds are in a bubble, claiming the sector is likely to be successful for many years.

Speaking at the Hargreaves Lansdown conference in Bath last week, higher-income manager Thompson dismissed suggestions that equity income funds would go the same way as the technology/media/telecom sector, which collapsed in March 2000.

He said prices of dividend-yielding companies have simply risen from “ridiculously low” levels to more sensible valuations. This, he argued, was not the case in the TMT sector.

Thompson said that income managers should be buying unfashionable, high-yielding stocks with strong balance sheets while selling popular companies with weaker finances.

Retailers such as DFS, he said, are unpopular with the market but remain good buys, with high dividends and rising share prices.

He said: “Equity income is not in a bubble. Just because it has been right for the last three years does not mean it is not going to be right for the next five years.”

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