Five 'income incubators' from the small-cap market

Small-cap players

James Lynch, manager of Downing's Monthly Income fund, has identified five 'income incubator' stocks from the small-cap end of the market that he believes can grow earnings and yields over time.

He said: "Generating high and sustainable income in an environment of low growth and low interest rates continues to pose a challenge for investors. We believe many investors are turning to equity income for yield, as fixed income is no longer the obvious source of quality income and prime commercial property appears overvalued." The Downing Monthly Income fund has a multi-cap investment approach, weighted towards companies at the smaller end of the market and manager Lynch believes many of the holdings in the portfolio are 'income incubators' - companies that can potentially grow earnin...