Dividends to rise over the next year

Nick Mcleod-Clarke, Fund Manager of BlackRock's UK Income Fund: "Savers relying on company dividends, as a source of income, may feel as if they have suffered a severe 'haircut' recently, as a stream of banks and other household names have cut their payouts. However, although the hair may have been re-styled, savers should take some comfort that it hasn't stopped growing.

"Indeed, if you look beyond the headlines so far this year you can see that more than six out of ten companies in the FTSE 350 have actually increased dividends, whilst around a quarter have cut them. Major oil companies, in particular, have raised dividends substantially, and if you are invested in those companies which declare dividends in dollars, you'll also have benefited from dollar strength against sterling.

"In addition to these major oil companies, when seeking income, we currently like mobile telecoms (Vodafone), pharmaceuticals and utilities. Some compelling opportunities can also be found within the financial sector - whilst banks have been hit hard a number of financial companies, like Admiral Insurance, remain highly cash-generative and continue to pay good dividends to investors.

"Overall, given a stable pound, we currently expect dividends to rise modestly over the next year. However, dividend growth will be focused, so investors must pay attention to stock and sector selection".