From Morningstar: 2024-03-28 04:35:00

In the first quarter of 2024, investors are optimistic about the upcoming earnings season and potential benefits of interest rate cuts. UK income stocks have seen minimal dividend growth, with companies like Lloyds, GSK, and Reckitt raising payouts. However, companies are relying on share buybacks to pay shareholders, like Shell and Reckitt, despite challenges like the $60 million damages award Reckitt faced. The debate over share buybacks’ merits continues, but they do provide a boost to total shareholder yield in the UK market.

UK income stocks face equity risk, reminding investors of market volatility. Building a diversified portfolio within an ISA can offer significant tax advantages for income investors. Outside the ISA wrapper, dividend taxation rates vary from 8.75% to 39.35%, with reduced tax-free allowances in the current tax year. Capital gains tax reductions also impact investors, making ISA protection more important for long-term wealth accumulation.

With rising inflation and fluctuating market conditions, UK income stocks face challenges in providing real yields to investors. Companies struggle to match dividend payouts with high inflation rates, making it difficult for investors to achieve real returns. However, there are alternative options for investors to generate income, such as cash ISAs with 5% returns or UK 10-year gilts with a yield of under 4%.



Read more at Morningstar: Top FTSE 100 UK Dividend Paying Stocks – ISA Season…