Go for cash-rich mid-caps in 2015, investors told

These firms will maintain a stable dividend yield.

Investing in small and mid cap firms is not for the faint-hearted this year, as the market continues to be weighed down by volatility concerns brought about by rising interest rates.

However, a report by UOB Kay Hian stated that investors should consider betting on small and mid caps with hefty war chests, which may be able to weather the storm better than most.

These firms are more likely to maintain a stable dividend payment without the risk of higher interest payment.

“We expect companies in net cash positions to outperform in a rising interest rate environment. On that note, we believe fund managers will come to appreciate mundane small/mid-caps with hordes of cash on their balance sheets and with the ability to pay out stable dividends backed by earnings growth. In addition, these companies will not be directly impacted by higher financing costs in a rising interest rate environment and may even be in an acquisition mode when higher geared companies would probably stay away,” UOB Kay Hian noted.

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