Dividends are back – here's where to find them
The FTSE 100 is yielding 3.7% – not too bad in an age of 0.1% interest rates. And the UK isn't the only place to find dividends, says Merryn Somerset Webb. Japan is looking attractive, too.


Dividends are back. In the second quarter of this year, total UK dividend payouts jumped by a pleasing 51% to £25.7bn, thanks mostly to companies that cancelled dividends in March last year restarting them. Link Group (which publishes a regular UK Dividend Monitor) now forecasts that dividends should grow by around 24.4% this year, for a full-year total of £71.2bn. That is significantly less than in 2019 (just over £100bn) but nonetheless represents a good recovery with more to come as the UK economy continues to normalise.
You can now get a yield of 3.7% on the FTSE 100 – which with interest rates at 0.1% and inflation rising doesn’t look bad at all. If you can cope with the risk of holding individual stocks there’s a lot more than that on offer: how about 6.5% on Vodafone? Those looking for a more diversified and international stream of income might consider Alliance Trust, a UK-listed trust that gives low-cost access to genuinely active management through the concentrated portfolios of ten excellent equity managers, most of whom UK investors would not have access to independently. The dividend yield is not super-high at the moment (1.4%) but it has risen every year for the last 54 years and Investec points out that the board is in the process of “reviewing the level and funding of the dividend to assess if a more attractive and sustainable level of distributions may be provided”. I suspect that it can.
On the subject of attractive and sustainable dividends, in this week's magazine we look at the Japanese market. There was a time when this was the last place you’d go for income. No longer. Today the market yields 1.7% and there are even Japanese income funds (eg, the Jupiter Japan Income Fund and the Baillie Gifford Japan Income Growth Fund).
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
We often write about Japan in MoneyWeek (Olympics or no Olympics). The market has been one of the cheapest in the developed world for years and – even after a 25% rise in the last year – it still is. Whenever we point this out, some of you email to say that cheap is nice, but if something is cheap and stays cheap what use is it to an investor looking to make actual returns. What’s the catalyst? Our reply has been to note several things that might spark a shift in sentiment (and hence prices), but also to add that ordinary investors don’t really need one. Professional investors are pushed for time – they are judged every quarter. That’s why so many of them insist that their fund is run with a “value plus catalyst” strategy. But if you aren’t judged every quarter you should have no sense of urgency. A “value plus patience” strategy will do you.
That said, a sense of what might get things moving is nice. With that in mind, listen to this week’s podcast with Joe Bauernfreund, manager of the AVI Japan Opportunity Trust. He holds a fairly concentrated portfolio of smaller stocks in Japan, many of which trade at prices not much higher than the value of the cash on their balance sheets. The trust initially aimed to be its own catalyst – engaging with companies to help them unlock that value for shareholders. But now private-equity managers have noticed the opportunities on offer in Japan, and money is flooding in. We don’t always feel happy about private equity buying too many public companies (it is bad for shareholder democracy). But it should at least spark some share-price movement.
Sign up for MoneyWeek's newsletters
Get the latest financial news, insights and expert analysis from our award-winning MoneyWeek team, to help you understand what really matters when it comes to your finances.
Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).
After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times
Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast - but still writes for Moneyweek monthly.
Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.
-
8 of the best houses for sale for around £500,000
Some of the best houses for sale for around £500,000 – from a 19th-century stone farm cottage in North Yorkshire and a two-bedroom apartment in Edinburgh’s New Town to a converted Methodist chapel in Norfolk
-
What will the unravelling of US-China trade mean for the economy?
What will a US-China decoupling mean for the global economy?
-
Two ways to tap into monopoly profits from airports
Most investors can’t get their hands on airports. Here are two ways you can
-
Fat profits: should you invest in weight-loss drugs?
The latest weight-loss treatments could transform public health and the world economy. Should you invest?
-
How investors could profit from Ramsden Holdings' four-part growth strategy
Ramsdens Holdings offers a diversified set of financial and retail services and a juicy yield, says Dr Michael Tubbs
-
How to invest in the booming insurance market
The insurance sector is experiencing rapid growth after years of stagnation. Smart investors should buy in now, says Rupert Hargreaves
-
Out of America's shadow: Why Trump's tariff chaos may be good for non-US stocks
Opinion Upending global investment and trade could benefit other countries at the expense of the US market, says Cris Sholto Heaton
-
BP's 'long, painful decline' – and why next year could be even tougher
Opinion Long-suffering shareholders in oil giant BP have been pushing for change. It won’t come soon enough, says Matthew Lynn
-
Investment trusts tap the profits in exotic and obscure global markets
Opinion Peter Walls, manager of the Unicorn Mastertrust fund, highlights three investment trusts as he shares where he'd put his money
-
Falling revenues and mounting debt spell trouble for Jumia Technologies
Struggling African e-commerce platform Jumia Technologies looks headed for the exit, says Dr Matthew Partridge.