- Add some mid-caps for a broader sector mix
- Look for 'boring', resilient businesses
Large cap shares should form the spine of a UK equity income portfolio. The energy, mining and oil & gas sectors regularly contribute the lion’s share of the pay-outs made by UK-listed companies. Then there are utilities, consumer staples and tobacco stocks. All feature prominently in our latest UK dividend screen but it is notable that many of these companies face either cyclical or structural issues (in many cases both).
Diversification is crucial to spread the idiosyncratic risks of companies and the broader challenges for their sectors. It’s also important to look for smaller companies delivering steady operational performance and with solid financial fundamentals as these may offer decent expectations of dividend growth, and widen the spread of sector exposures.
