Investing for Income

[Devonseaglass]

With UK tax rates at 10% for dividend income I think I should be investing in companies paying regular and low risk dividends. Any advice?

 

[Jack o'Clubs]

First, on the tax aspect, if you're a higher rate tax payer you'll pay 32.5% as the first 10% is deducted 'at source', the rest via your tax return. Still better than 50% income tax though.

Options would include a dividend biased ETF or buying individual stocks. If the latter, and you really want 'low-risk' then you need to make sure you have a basket of stocks where dividend per share is covered at least 2x by EPS and CFPS. You should be able to pull together a portfolio yielding 4.5-5% without taking undue risks.

 

[Devonseaglass]

First, on the tax aspect, if you're a higher rate tax payer you'll pay 32.5% as the first 10% is deducted 'at source', the rest via your tax return. Still better than 50% income tax though.

Options would include a dividend biased ETF or buying individual stocks. If the latter, and you really want 'low-risk' then you need to make sure you have a basket of stocks where dividend per share is covered at least 2x by EPS and CFPS. You should be able to pull together a portfolio yielding 4.5-5% without taking undue risks.

Thanks Jack o'Clubs. That sounds better than 3.5% interest on a deposit account with 20% tax and no capital gain upside.