3 Recovery Plays From the Leading UK Equity Income Fund: BP plc (BP), Tesco Corporation (TESO), RSA Insurance Group plc (RSA)

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RSA Insurance Group plc

RSA Insurance (formerly Royal and Sun Alliance) is the biggest Footsie company in the general-insurance sector — or “non-life insurance” sector, to use the official classification. The group’s global network spans 140 countries and provides property, casualty, motor, and household insurance to more than 20 million people.

RSA shareholders suffered a torrid time around the turn of the millennium, including a double dividend cut. But the company has been on a long-haul recovery since, and despite the financial crisis, it has managed to increase its dividend every year.

However, in the last year or two, the market has once again been pricing RSA for a dividend cut. At a share price of about 130 pence, the forecast dividend gives a yield of 7% — more than double the Footsie average. In such situations, one of two things can happen to bring the yield to a more normal level: a dividend cut or a significant share-price rise. The managers of the JO Hambro UK Equity Income fund appear to believe in the latter prospect.

The article 3 Recovery Plays From the Leading UK Equity Income Fund originally appeared on Fool.com and is written by G. A. Chester.

G A Chester does not own shares in any of the companies mentioned in this article. The Motley Fool owns shares in Tesco. Motley Fool newsletter services have recommended buying shares of Diageo.

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