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Income fund chiefs face dividend conundrum

Schroders income maximiser fund manager Thomas See bel-ieves that many other income fund managers will face a conundrum when it comes to offering dividends.

See says that although analysts are anticipating yield levels sticking around the 5 per cent mark for the next year or two, the dividend swap market – where you buy and sell future dividends for cash – is at half that level, indicating that the overall yields could be far less.

He says: “There are a number of problems facing income managers, namely that six stocks in the shape of HSBC, Shell, BP, Vodafone, GlaxoSmithKline and AstraZeneca account for 50 per cent of dividends in the market while 19 stocks account for 70 per cent of the market.”

See became lead manager on the income maximiser last month, replacing John Teahan. The maximiser targets 7 per cent income a year through dividends and premiums from selling covered call options.

See also echoed the views of other income managers, such as PSigma’s Bill Mott, by saying that there may also be difficulties for fund managers seeking to diversify as, if they end up all picking the same stocks, this is likely to push up the price.

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