Aviva PLC (LSE:AV.), the insurance bellwether, may warrant a closer look for income investors, according to a research note by Shore Capital.
The firm cites the FTSE 100 listed group's forward yield of 8.3% and a decade-long compound annual growth rate (CAGR) for dividends per share (DPS) of approximately 5% as potentially attractive traits.
A more benign economic backdrop may make the insurance sector more appealing, the note suggests, despite potential risks to dividend forecasts.
Turning to the wider market, Shore warns that the forthcoming earnings seasons might see a drawdown in dividend expectations.
While analysts might have to adjust DPS predictions for cyclical sectors like construction and consumer discretionary to align with the economic reality, the impact on share prices should be relatively mild.
The note suggests this muted response is due to these sectors' already low valuations, and robust corporate balance sheets may prevent widespread nominal reductions in DPS.
The research note also highlights opportunities for equity income investors given the FTSE All Share's 12-month forward dividend yield of 4.1%, a 20 basis points (bps) discount to the 10-year UK treasury yield of 4.3%.
The analysts consider this backdrop favourable for domestic cyclicals, as lower long-term interest rates could protect their near-term earnings if the economy decelerates more gently.
Shore maintains a keen eye on companies with robust financials and strong dividend-paying track records. The brokerage highlighted the encouraging performance of construction companies Somero and Crest Nicholson PLC (LSE:CRST), alongside consumer sector representative ScS.