Four attractive UK income opportunities

Professional investor Mark Barnett of the Invesco Perpetual Income and Growth Investment Trust picks four UK stocks that should generate income that will grow above inflation.

Each week, a professional investor tells us where he'd put his money. This week: Mark Barnett, Perpetual Income and Growth Investment Trust.

The UK equity market offers one of the most attractive levels of income of all global equity markets. However, this income has traditionally been generated by a concentrated mix of large-cap stocks. I seek to create a diversified portfolio of income-generating companies with the potential to grow those payments ahead of inflation over time. The ability of investments to generate sustainable free cash flow and the attitude of company management towards shareholder distributions is crucial to success. Fortunately, within the UK market, there are some very interesting areas of opportunity.

Subscribe to MoneyWeek

Become a smarter, better informed investor with MoneyWeek.

Domestic firms hit by Brexit

One area that offers evident value is real estate, where political uncertainty has placed significant pressure on valuations. Within this sector, NewRiver Reit (LSE: NRR) stands out. This real estate investment trust offers highly diversified income from retailers that are growing (discounters and convenience stores) and are relatively resilient to online challenge. Roughly one fifth of the portfolio is pubs, while the top-ten retailers account for less than 15% of NewRiver's rental income and there is virtually no exposure to department stores.

Retailer Next (LSE: NXT) is another business operating within a Brexit-hit sector, while shares face the additional challenge of the pessimistic story around high-street retailers. However, the company is challenging this narrative. Next released encouraging full-year results in May that included a 15% rise in online sales evidence that the company's multi-channel offering allows it to see the growth of online shopping as an opportunity not a threat. Meanwhile, the increase in the annual dividend reaffirmed Next's focus on shareholder returns.

Advertisement - Article continues below

Fears about tobacco are overdone

Imperial Brands (LSE: IMB)

British American Tobacco (LSE: BATS)



Share tips

Share tips of the week

MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK's financial pages.
17 Jan 2020

Don’t panic about Iran – but don’t sell your gold either

Markets have reacted calmly to the tension between the US and Iran. But don’t get too complacent. It’s still a good idea to hold on to some gold as in…
9 Jan 2020

Here’s how gold could rise above $7,000 an ounce

That the gold price could hit $7,000 an ounce is a logical and plausible possibility, says Charlie Morris. Here, he explains how it could get there.
30 Dec 2019
Share tips

Share tips: eight stocks that should deliver robust returns

Ryan Ermey of US publication Kiplinger’s Personal Finance chooses his favourite stocks for the next decade, which should be able to grow for years.
28 Dec 2019

Most Popular

House prices

The biggest risk facing the UK housing market right now

For house prices to stagnate or even fall would be healthy for the property market, says John Stepek. But there is a distinct danger that isn't going …
17 Feb 2020
UK Economy

How the BBC can survive the end of the TV licence

The TV licence that funds the BBC is looking way past its sell-by date, says Matthew Lynn. Here's how it could survive without it
16 Feb 2020

Money Minute Monday 17 February: good news ahead for the UK economy?

Today's Money Minute looks to a week in which we get the latest employment and inflation numbers, plus retail figures for January and a slew of eurozo…
17 Feb 2020

Why investors shouldn’t overlook Europe

SPONSORED CONTENT - Ollie Beckett, manager of the TR European Growth Trust, tackles investor questions around Europe’s economic outlook and the conseq…
6 Nov 2019