LIVE MARKETS-Britain's stock market attractive for income-focused investors

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BRITAIN'S STOCK MARKET ATTRACTIVE FOR INCOME-FOCUSED INVESTORS

Goldman Sachs expects companies in the FTSE 100 to return 6% of market cap to shareholders via dividends and buybacks this year, well above global averages, making the market particularly attractive for income-focused investors.

The relative appeal of British stocks is further supported by the introduction of Section 899 in Trump's tax bill, which potentially withholds taxes on U.S. dividends, Goldman Sachs says.

"As a result, capital rotation toward the UK could accelerate, especially given the FTSE 350's free cash flow yield of over 6%," the bank says.

But while the UK leads on shareholder returns, there is no "free lunch", says Goldman.

The U.S. bank notes that British companies with low dividend growth are trading on lower valuations, such as Basic Resources, Energy and Utilities. Meanwhile, those with high dividend growth have higher valuations, such as Technology and Travel & Leisure.

And buybacks are unlikely to grow further, Goldman says, as the UK's equity base continues to shrink as corporates remain the dominant buyer of UK stocks.

(Samuel Indyk)

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