Finding safety in company business models

Choosing stocks with reliable growth and yield and not too much risk is becoming harder for managers, explains Ciaran Mallon, fund manager at Invesco Perpetual

If you look at the stock market at the moment, the FTSE All-Share index is yielding around 3.6%, which is a decent level, in line with the average for the past ten years or so. However, one of the challenges of creating a portfolio with a good yield is making sure it is well diversified and the dividend is well supported. For example, while there is a lot of yield in the very large blue-chip companies, areas such as oil and mining are paying out most of their net income in dividends, meaning they are not particularly well covered. It therefore means the yield is relatively risky. The ...