According to Sarah Emly and William Meadon, co-managers of the JPMorgan Claverhouse Investment Trust, however, what was largely a headwind so far in 2014, could well become a tailwind in 2015.
“There is a possibility that the currency headwind might lessen, which would support dividend growth from some of the more globally oriented large-cap stocks and this would consequently have a positive impact on the overall UK equity market dividend growth,” the managers said. But, they added, more domestically focused stocks could still prove to be next year’s dividend winners.
“The dividend prospects for some of the general retail stocks, in both the FTSE100 and the FTSE Mid-250 indices, remains positive. A number of the quoted housebuilders, of varying market capitalisations, are likely to continue to return significant amounts of cash to shareholders as dividends. Some of the travel and leisure companies are also anticipated to deliver strong dividend growth, as well as some of the more “defensive” sectors such as the tobacco stocks.”
Many of these views are echoed by Tineke Frikkee, manager of the Smith & Williamson UK Equity Income Trust. She too expects the dollar to strengthen against sterling going into 2015, and sees this as a tailwind for dividend stocks.
Frikkee is also positive on the more domestically focused UK stocks. “We have seen both food and petrol price deflation in the UK over recent months and, we are beginning to see a glimmer perhaps of wage inflation, while at the same time employment is looking good,” she told Portfolio Adviser.
But, she added, while the outlook is positive, the big exposure is through travel and leisure companies, as she is of the view that UK consumers are currently more likely to spend money on experiences rather than things.
“I don’t like supermarkets at the moment, and I am still a bit wary on the clothing retailers, as I think they are likely to have excess winter stocks, after the warm weather we have seen,” she said.
