Dividends
“ The current philosophy is , ‘ pay it out , because you ’ ll only get grief if you use it to drill ’”
Richard de Lisle Manager of the VT De Lisle America fund
Recent high-profile UK listings such as Deliveroo and Wise , formerly known as TransferWise , failed to catch investors ’ interest , with both seeing significant share price declines from their IPOs last year – about 50 % in the case of Deliveroo . Could it be that newly listed UK companies have a much smaller universe of potential investors if they reinvest profits for growth rather than paying dividends ? Ashby doesn ’ t think so , as many UK equity income funds seek to invest in companies offering the potential for dividend growth as well as a reasonable yield . He gives the example of Darktrace , which also listed in 2021 but rallied 200 % in a matter of months , before falling back to earth with a bump . It is currently up about 20 % on its flotation price . “ As a result , paying a lower dividend to invest for future growth should not necessarily limit the universe of potential investors ,” he says . “ Although the UK equity market does not currently have the same exposure to tech firms as the US , the successful history of UK-listed companies like ARM Holdings , the
Issue 81 - February 2022 / 15 /