Is it time to start buying the FTSE’s Dividend Dogs?
The return of useful interest rates on cash savings has provided an additional choice for income-seeking investors.
But despite the 4%+ risk-free rates available today, I think that an equity income strategy is likely to remain a better choice for investors seeking income and long-term capital growth:
FTSE 100Total return (capital+divis)Annualised TRLast 5 years34%6%Last 20 years366%8%
Date: 14/10/24
The impact of compounding means that an investment made at 8% will be worth more than double an investment at 4% after 20 years:
£10,000 invested at 8% would be worth £46,609 after 20 years£10,000 invested at 4% would be worth just £21,911 after 20 years
Inflation is another factor to consider. With UK inflation still running at around 3%, cash savings at 4% aren’t technically falling in value. But they’re not growing much, either.
I reckon that owning a selection of FTSE 100 shares with above-average dividend yields could be a simple and relatively hassle-free way to invest in UK equity and generate a competitive level of income.
The FTSE 100’s recent gains (14% in the last year) have pushed the index’s average dividend yield down...