Income investors must be on the right side of change

THE year has proved challenging for many investors, as they come to terms with the impact of Covid-19 on society and business. The year has proved particularly difficult for income investors, with many companies understandably looking to preserve capital and protect jobs, in some cases suspending or cutting dividends.

But despite the novel coronavirus disruption, some things have not changed. The fundamental objective of income investing - finding cash-generative businesses with strong balance sheets, meaning they can grow their dividends sustainably - is more relevant than ever. And, as low interest rates persist, income investing still holds the promise of attractive returns.

The hard part for investors is to ensure they are not overpaying for these desirable characteristics. In that sense, maintaining discipline on valuation remains key.