UK income stars cut tobacco as regulatory threat emerges

Top UK equity income managers have been cutting their weighting in tobacco stocks as concerns over earnings momentum and new rules on plain packaging put pressure on share prices.

Tobacco firms, which are among the top performing of all UK-listed companies over the last decade, have become income staples for many investors. While other income stocks have suffered catastrophes in recent years – banks were badly hit by the credit crisis, while BP lost more than 50% of its value after the Gulf of Mexico disaster – tobaccos have continued to perform strongly for income funds. As a result, the equity income sector’s leading lights continue to hold the stocks in abundance, with British American Tobacco (BAT) appearing among the top 10 of 44% of funds in the UK Equity...