Tip of the week: Which bonds are better than equities for income?

TIP OF THE WEEK

While the recent yield crossover of UK equities with the 10-year gilt led many investors to place a strong buy on the stock market, Ignis' Chris Bowie highlights a number of higher-yielding bonds better placed to deliver for income investors.

Scottish Widows Compare the T1 bonds with a cash price of 74 and a yield of 12.5% against its parent company, Lloyds, with an equity yield of zero. Of course, this is not a risk-free trade given there are risks Scottish Widows could be sold by Lloyds to another company that could gear up the balance sheet. The parent company will be not paying a dividend until at least the latter part of 2012 however, so in the meantime the bonds offer significant value. Lloyds ECN’s Very similar story to Scottish Widows in that they have the same equity parent (Lloyds again), which is not paying div...