katen patel

Written by Katen Patel

January, 2021

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To Pay or not to Pay?

As the UK endures yet another period of lockdown, we exit 2020 having witnessed a last minute Brexit deal, the start of a vaccination programme, and a strong period of reporting for UK listed companies. Analysts were quick to cut their forecasts sharply at the start of the pandemic, and as activity then picked up through the year, and confidence increased following a raft of vaccine announcements, the results we have seen from UK listed companies over the last month or so has been very encouraging relative to analyst expectations.

Estimate momentum (analyst upgrades vs downgrades) was negative during spring of 2020, stabilising over the summer and then turning positive moving into the end of the year. This has also fed through to dividends, with estimates reaching a trough in Q4 2020. The latest lockdown is likely to dampen any possibility of widespread upside dividend surprises in the first quarter of 2021, but should the vaccination programme continue apace and life return to some semblance of normality in the second half of the year, we could see a significant increase in dividend payments.

Portfolio positioning of the UK Equity Income Fund

Throughout 2020 our unconstrained approach has allowed us to maintain a balance in the UK Equity Income portfolio between defensive companies which perhaps have benefitted from the crisis and therefore been able to pay dividends; for example, value added resellers of technology equipment such as Computacenter, and companies which have suffered more and paid no dividends yet have the potential to bounce back significantly; such as National Express, a transportation company offering public and school bus services.

Since the vaccine announcements in Q4, we have continued to add to transport and leisure stocks, banks, and industrials, but with a continued focus on companies that have a strong balance sheet, an attractive offering and stand to benefit from weaker competition going forward. Despite this mix of companies that have paid dividends and those that have not in 2020, the fund has maintained a healthy yield premium to the FTSE All-share and currently offers a 12 month forward underlying dividend yield from the portfolio of 4%, compared to the benchmark at 3.6%, together with higher earnings and cash cover.

For more information on the JPM UK Equity Income Fund, please click here.

The securities above are shown for illustrative purposes only. Their inclusion should not be interpreted as a recommendation to buy or sell. Past performance and yield are not a reliable indicator of current and future results

For Professional Clients/ Qualified Investors only – not for Retail use or distribution.

This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation, to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are, unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Past performance and yield are not a reliable indicator of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment products, there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. Prior to any application investors are advised to take all necessary legal, regulatory and tax advice on the consequences of an investment in the products. Investment is subject to documentation, which is comprised of the Prospectus, Key Investor Information Document (KIID) and either the Supplementary Information Document (SID) or Key Features/Terms and Conditions. These documents, together with the annual report, semi-annual report and instrument of incorporation are available free of charge from JPMorgan Asset Management (UK) Limited. This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.

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