In a defensive move, Taylor has actually sold out of lower yielding names, such as contractor VP, retailer WH Smith, plastics firm RPC and tech business Micro Focus. Instead, the fund has invested in van-hire firm Northgate (4% yield), retailer McColl’s (7%) and Regional Reit (7%).
The fund has also benefited from unexpected special dividends this year from the likes of Shoe Zone and Headlam, the later having also raised its underlying dividend by 18%.
Another small and mid-cap focused vehicle, Unicorn UK Income, has also benefited from special dividends this year from Headlam, as well as paving manufacturer Marshalls and IT services provider FDM Group.
“From looking at forecasts and at some of the dividend policies of some companies I don’t think they will be the only three offering specials this year,” says fund manager Simon Moon.
“On top of growth on the underlying dividend, we’ve seen some upside. Yield is always going to be an issue and a challenge for us but from what we’ve seen through the results season we have been pleasantly surprised by companies returning cash to shareholders.”
Unicorn has been buying into Lavendon Group and Interserve, while having also recently initiated a position in Green King.
“It acquired Spirit and we think opportunities there from the combined group are more than the share price is giving it credit for,” says Moon.
“Green King has fantastic long-term dividend record but there are also some near-term opportunities in consolidating the two pub groups.”
