Dividend dogs vs diamonds: Part 3 – marvellous mid-caps
In the first two instalments of our mini-series on dividends, we focused on the UK’s blue-chip space – historically a reliable hunting ground for generous income. But the FTSE 100 has become a minefield for dividend investors where good quality comes with a high valuation risk and good value comes with the risk of complete failure. So, with the large-cap space proving problematic for income hunters, we’ve taken a look at the UK’s mid-cap market to find some reliable dividend payers with a decent yield.
Mid-caps are often described as the overlooked middle child of the financial markets. That has certainly been true in the UK in the last few years as investors have written off the domestic FTSE 250 index amid fears of Brexit-related disruptions. In general, UK mid-caps have underperformed both their larger and smaller peers.
But assuming all UK-focused companies will be battered in the next few years as Brexit mayhem continues is just as foolish as assuming that all international-focused companies will grow nicely. True, there are some British mid-caps which are highly exposed to the current political drama and expected end of the economic cycle. There are also plenty of middle-sized companies which are fighting sector specific issues (retailers and housebuilders, for example), while some terrible mid-caps have failed to invest enough in future growth.
But mid-caps can be a sweet spot for investment – small enough to grow, but big enough to avoid risk. When that comes with a well-covered, high…
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