Artemis tops Principal equity income chart

Artemis, Invesco Perpetual and Neptune have taken the podium in Principal Investment Management's list of the best equity income funds.

Principal says 2009 has been a tough year for the equity income sector and investors will look back on the period with mixed feelings: "Whilst benefiting from a significant uplift in capital values, the equity income sector struggled to keep pace with the run in low yielding recovery plays.

"High quality, dividend paying stocks were left kicking their heels as money, once again, flowed into momentum-driven, economically sensitive shares."

Artemis Income, under Adrian Frost and Adrian Gosden, with a net dividend yield of 4.6% and volatility over five years of 4.1% ranked first in Principal's White List of top top funds. This was followed by Neil Woodford's Invesco Perpetual Income, with a yield of 4.1% and volatility of 3.8%. Neptune Income, run by Robin Geffen, ranked third by yielding 4.3% with volatility of 4.4%.

The top five were rounded out by Woodford's Invesco Perpetual High Income fund and Clive Beagles' and James Lowen's JOHCM UK Equity Income portfolio.

The report says: "The current White List funds experienced an average year-on-year dividend drop of just 8%. This followed an horrendous economic environment that saw companies scrap dividends to ensure survival.

"However, most of the best fund managers are confident of a return to dividend growth. Many companies that battened down the hatches in the midst of the recession are likely to recommence or increase dividend payments in the coming year."

However, Principal is less positive about its Black List funds which "regularly disappoint investors".

"The Black List seeks to remind investors that there may be better homes for their money," it explains.

The F&C Stewardship Income fund was one fund which fell from the recommended table into the Black List, but Principal says ethical investors should give current lead manager Catherine Stanley a chance on the fund.

Investors who have stuck with GLG's UK Income fund, now under John White and Jason Mackay, should also stick with the portfolio despite it entering the Black List.

However, Principal says it finds "little justification" for holding JPM Premier Equity
Income, despite an improved 2009, and investors should switch out of the fund. They may also consider doing so from the Prudential Equity Income trut, it adds.