During October, the UK equity market produced a negative total return of 3.8% as measured by the FTSE All Share Index. Large companies underperformed with the FTSE 100 Index producing a negative return of 4.8% compared with a negative return of 0.5% for the FTSE 250 Index of medium-sized companies. The FTSE 100 Index was adversely affected by the poor share price performances of certain sectors which are predominantly made up of large companies, such as tobacco, life insurance and pharmaceuticals.

For City of London, additions were made in the tobacco sector to British American Tobacco and Imperial Brands and in life insurance to Legal & General, given the high and secure dividend yields available. After exceptionally good share price performances, some profits were taken in speciality chemical company, Croda, in engineer Spirax-Sarco and in Halma, the health and safety product manufacturer. A complete sale of the holding in TP ICAP was made after it announced a large acquisition and dividend cut.

The news of the success of Pfizer’s Covid-19 vaccine was very well received by world stock markets. While it will take time for large parts of the population to be vaccinated, it does provide “light at the end of the tunnel” for the pandemic. A steady stream of companies that did not pay dividends in the spring have returned to paying in recent months, such as BAE Systems, Direct Line, Persimmon and Land Securities from City of London’s portfolio. The combination of the attractive dividend yield of UK equities and more confidence in the dividend paying capacity of companies could lead to positive returns being sustained.



Dividend – A payment made by a company to its shareholders. The amount is variable, and is paid as a portion of the company’s profits.

Yield - The level of income on a security, typically expressed as a percentage rate. For equities, a common measure is the dividend yield, which divides recent dividend payments for each share by the share price. For a bond, this is calculated as the coupon payment divided by the current bond price.