UK share prices generally rose during February, despite the fact that the pressing issue of Brexit remained unresolved. The FTSE 100 Index rose by 1.5% during the month, while the FTSE 250 Index increased by 2.5%. The yield on the FTSE 100 Index edged up during February from 4.53% to 4.54%, and the FTSE 250 Index’s yield eased from 3.19% to 3.11%.
- Equity yields continued to outstrip gilts by a substantial margin
- Royal Bank of Scotland announced a special dividend
- Lloyds Banking Group unveiled a share buyback
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UK share prices generally rose during February, despite the fact that the pressing issue of Brexit remained unresolved. The FTSE 100 Index rose by 1.5% during the month, while the FTSE 250 Index increased by 2.5%. The yield on the FTSE 100 Index edged up during February from 4.53% to 4.54%, and the FTSE 250 Index’s yield eased from 3.19% to 3.11%. Meanwhile, the benchmark UK government bond yield rose from 1.24% to 1.25%.
“Investors focused on diversifying their exposure”
Since the start of the year, the best-performing FTSE sectors have been technology hardware & equipment, industrial metals & mining, general retailers, and software & computer services. The worst-performing sectors include telecommunications, health care equipment & services, banks, and oil equipment & services.
The average UK equity income investment company has delivered annual dividend growth of 4.5% over the last 20 years, outstripping annualised inflation of 2.8%, according to the Association of Investment Companies (AIC). Over that period, UK equity income investment companies have delivered a capital return of 252%.
Royal Bank of Scotland (RBS) revealed an increase in profits for 2018, but warned that defaults could increase in 2019 as “ongoing political uncertainties and geopolitical tensions” take their toll. The bank – which resumed its dividend payout in October 2018 after ten years – announced a final dividend of 3.5 pence per share and a special dividend payment of 7.5 pence per share. The UK Government still retains a 62.4% stake in RBS. Elsewhere in the banking sector, Lloyds Banking Group unveiled its full-year results for 2018 and announced a 5% increase to its dividend payout alongside a share buyback of £1.75 billion.
Investors remained cautious during January, according to the Investment Association (IA). Against a backdrop of uncertainty over Brexit, international trade tensions, and concerns over the outlook for Europe’s economic growth, investors focused on diversifying their exposure with Mixed Asset funds, and avoided UK and European equity funds. During the month, UK equity funds experienced net retail outflows of £135 million, while European equity funds suffered net retail outflows of £450 million. Demand for funds in the UK Equity Income sector waned slightly in January compared with December, but remained firmly in positive territory. Although investors’ appetite for UK Smaller Companies funds staged a sharp improvement during the month, the mainstream UK All Companies sector remained firmly out of favour.
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