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'Nimble' Cholwill goes beyond FTSE 100 for income
Small and mid-cap companies can provide high yield income says Martin Cholwill, manager of the Royal London UK Equity Income fund.
The search for income means investors can end up holding the same defensive FTSE 100 companies across a number of funds and trusts.
However small and mid-cap companies can prove to be strong dividend payers and Martin Cholwill, manager of the Royal London UK Equity Income fund , says 41% of his fund is invested in medium-sized stocks.
Cholwill says he aims to buy companies with strong dividend yields that have fallen out of fashion and the fund has recently benefited from holdings Asia focused Spirax-Sarco Engineering (SPX.L) and retailer Dunelm (DNLM.L).
The fund has given total returns of 51.4% over the past three years compared to the FTSE All-Share total returns of 36.1%.
Another area Cholwill has benefited from is the movement of tracker funds, which seek to replicate an index’s holdings. Cholwill says as a company is due to drop out of, or join, an index its price can weaken or vice versa, providing a buying opportunity.
Daily Mail and General Trust (DMGT.L) and Hargreaves Landsdown (HL.L) are two companies he benefited from as they left and joined the FTSE 100.
Water companies Pennon (PNN.L) and Servern Trent (SVT.L) are also top holdings in the portfolio, which Cholwill views as strong buys based on their steady inflation linked revenue streams.
The fund’s most recent acquisitions have been Booker (BOK.L) and Cineworld (CINE.L).
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- Spirax Sarco Engineering PLC (SPX.L)
- Dunelm Group PLC (DNLM.L)
- Daily Mail and General Trust PLC (DMGO.L)
- Hargreaves Lansdown PLC (HRGV.L)
- Pennon Group PLC (PNN.L)
- Severn Trent PLC (SVT.L)
- Booker Group PLC (BOK.L)
- Cineworld Group PLC (CINE.L)
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