JO Hambro Capital Management UK equity income manager Clive Beagles has been adding to HSBC and BP as he believes they will become the major mega cap dividend payers over the next few years.
Beagles, who runs the £1.3bn JOHCM UK Equity Income Fund, says that he has been adding to HSBC and BP over the last few months.
BP has been reported to be planning a share buyback of at least $4bn, using the proceeds from the sale of its half of its Russian joint venture to Rosneft, according to the Financial Times.
The buyback aims to lift a share price that has not recovered to levels seen prior to the Deepwater Horizon Oil Spill on April 20, 2010. The share price fell from 599p following the spill to 270p on June 25, 2010.
BP is currently trading at 412p on November 21.
The fund is underweight banks in general, because of the lack of dividends and clarity in balance sheets, according to Beagles.
However, he has upped his HSBC position from 6.1 per cent in July to 6.7 per cent as of October, according to data from FE.
He says: “HSBC will lead the dividend paying agenda in banks. They will be on the front-foot on that.”
The bank currently has a dividend yield of 4.15 per cent.
Other financials that he owns are RSA Insurance, Aviva and Standard Life. One financial he is avoiding is Hargreaves Lansdown.
He says: “RDR is most uncertain for them. The valuation is a bit rich. We own Standard Life, which is much cheaper. We like what they are trying to do with the platform and auto-enrolment.”