Neptune Investment Management is introducing a ‘dividend risk’ breakdown to its fact sheets to increase transparency for income-seeking investors.
As from today the firm is publishing figures to show how dividends within its equity income funds are diversified.
Information showing the proportion of yield that comes from the top 10 holdings will be added to the Neptune Income, Neptune Quarterly Income, Neptune US Income and Neptune Global Income funds while a section on dividend risk has been added to the website. The figures will be updated monthly.
Robin Geffen, Neptune founder and manager of the Neptune Income fund, says dividend risk in some UK equity income funds is at “alarming levels, adding that Morningstar data shows around a third of UK Equity Income funds generate more than 50 per cent of their yield from their top 10 holdings.
Geffen says: “We are proud to be the first fund manager to make this information readily available to investors. We believe this is a particularly important issue in the UK income market, where dividend risk is at elevated levels at the moment. It is well known that UK dividends are highly concentrated, with around 38 per cent of all dividends coming from just five companies. This is particularly topical at the moment given that dividend cover in the UK is at its lowest level since the height of the financial crisis.
“In spite of the Investment Association’s recent change to IA UK Equity Income’s yield target, we are finding more than enough opportunities in the UK market to hit 110 per cent of the FTSE All Share’s yield, and importantly we are able to achieve this from a diversified source of sectors and companies. The top 10 holdings only accounts for 25.8 per cent of the Neptune Income Fund’s total yield.”
He adds: “This move to publish dividend risk is in keeping with our push towards transparency in recent years. Neptune Investment Management was the first fund manager to reveal active share across all of its fund fact sheets in 2015.”