It’s been a challenging year for income investors. Around £30bn of dividends has been cut and half of the payout to shareholders could vanish this year. But beyond the biggest stocks cutting back there lies a whole market of smaller businesses ready to keep going.
The biggest and most reliable payers have succumbed to coronavirus-related pressures and slashed payments. Shell – which was the FTSE’s largest payer – cut its dividend for the first time in 75 years and BT suspended its annual payout for the first time since listing in 1984.
So where should investors turn to for safe income? Professional stock pickers are choosing smaller, less well known companies to get their dividend fix. Telegraph Money polled them for their best income ideas.
Strix Group
A small British company that builds kettle parts is probably not many people’s investment radar. However, Strix Group, a £365m global leader in kettle safety technology, is worthy of attention.
Its devices are used in more than 100 countries by about 10pc of the world’s population every day and it has a 40pc market share. Chris McVey, of Octopus Investments, said it is a brilliant company with excellent dividend paying pedigree that will keeping paying well into the future because its market dominance.
“New product launches combined with a strong existing business means it has scope to grow revenues, earnings and dividends for the foreseeable future,” said Mr McVey.
It has a 4.2pc dividend yield and its management recently said it would pay its final 2019 dividend after a strong year for the business. The share price has risen 37pc since it was listed on the Alternative Investment Market (AIM) three years ago.
Emis Group
The health services and reliable computer software are of vital important right now. Any company that combines the two should be in demand, and British company Emis does just that. The £650m Aim-listed group is a leading provider of IT software and systems for the healthcare industry.
Mr McVey said the business was well positioned to keep growing on the back of increased demand for its products. In its recent annual general meeting the board said sales for the year were as expected despite the virus disrupting the economy.
Around 80pc of Emis’ sales are recurring and it has a considerable £40m of cash to spare. This means it is well buffered to survive difficult market conditions.
The business is well placed to invest for for the future while paying a healthy dividend, he said. It yields 3pc and has confirmed it will pay its final dividend of 2019.
