Why should you consider UK Equity Income today?

Staci West 20/04/2024 in UK, Income investing

Carl Stick, co-manager of the Rathbone Income fund, explains why investors should consider UK equity income despite the attractive income on cash in the bank.

The return on cash always influences the nature of the market in which we compete. When interest rates are low, long-duration assets like growth stocks tend to be our competition. Yet when rates are higher, like today, cash offers a good return, and that becomes our competition instead.

Our argument remains the same. We offer an attractive income yield, and most crucially, an excellent record of more than 20 years of growing that income. Also, people forget that interest rates from cash are locked in for only a year or two, if at all. When central banks start to cut rates, you would expect offered cash rates to slump dramatically, which would mean reinvesting at much lower rates of return.

And remember, income and the growth – and reinvestment of that income – generates a substantial proportion of our total return, and we offer flexibility. Our messaging of our longevity, health span, the reality that our working lives will be longer and less predictable, reminds us of the importance of UK equity income as an asset class. The argument is to maintain the appropriate level of risks in your investments and savings, and the argument is for the opportunity, both income and capital growth.

That, in a nutshell, is our robust defence against cash in the bank.

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