Dividend investing is a popular strategy that can be an effective way of building and maintaining wealth no matter whether you’re a new investor, in the process of building up your portfolio, or already retired. Studies have shown that, over the long term, dividends tend to make up the bulk of stock market returns.
Yet just because you’re interested in dividends doesn’t necessarily mean that you need to be an expert dividend stock-picker yourself. There are a number of good funds, investment trusts and ETFs that focus on this area of the market. Today, I’m taking a look at three top UK funds that have a dividend focus.
J O Hambro UK Equity Income fund
This fund is a classic equity income that holds a diversified portfolio of blue-chip names. If you’re looking for exposure to well-known, large-cap FTSE 100 stocks that pay large dividends, this fund could be an excellent choice. The top five holdings here include Royal Dutch Shell, BP, HSBC, Lloyds Bank and Rio Tinto – companies that all pay out large cash distributions to shareholders.
The fund has been an excellent performer over one, three, and five years, returning 10%, 25% and 61%, respectively. It currently has a dividend yield of around 4.3%. Fees are low, with an ongoing charge of just 0.67% per year on the Hargreaves Lansdown platform. If you’re looking to keep things simple, this could be a great fund to invest in. I added this fund to my own personal SIPP just recently.
Slater Income fund
Mark Slater is one of the top portfolio managers in the UK. He runs three different portfolios including a growth fund, an income fund and a recovery fund. Dividend investors should take a look at the Slater Income fund.
This fund can invest in large, medium and small companies and the top five holdings include Phoenix Group Holdings, Rio Tinto, ITV, Chesnara and Imperial Brands. I believe that this strategy of adding a few smaller dividend-paying companies into the mix is quite a good idea for long-term investors, as it could boost growth. Dividend investing is not limited to only large-cap companies.
Over one, three, and five years, the Slater Income fund has returned 4%, 17% and 66%, respectively. The yield on the fund is currently 4.3% and the ongoing charges are just 0.8% through Hargreaves Lansdown.
Marlborough Multi Cap Income Fund
Lastly, another dividend fund that I rate highly is the Marlborough Multi Cap Income Fund. I’m considering adding this fund to my lifetime ISA. It’s one of the most popular funds among ISA millionaires. Like the Slater Income fund, this doesn’t limit itself to large-cap dividend-paying stocks. In fact, it does the opposite, focusing on small- and medium-sized companies with yields over 2% where both capital growth and dividend growth are anticipated. The top five holdings currently include Intermediate Capital Group, Phoenix Group Holdings, Polar Capital Holdings, WH Smith and Central Asia Metals.
Over one, three, and five years this fund has returned 5%, 17% and 68%, respectively, and the current yield is a nice 4.5%. Ongoing charges are 0.64% on Hargreaves Lansdown. I think it’s an excellent choice for long-term dividend investors with a slightly higher risk tolerance.
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Edward Sheldon owns shares in Royal Dutch Shell, Lloyds Banking Group, ITV, Imperial Brands and has a position in the J O Hambro UK Equity Income fund. The Motley Fool UK has recommended BP, HSBC Holdings, Imperial Brands, ITV, Lloyds Banking Group, Royal Dutch Shell B, and WH Smith. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.