Our columnist has received eight trust dividend cheques so far this year, boosting his ‘forever fund’.
The bad news for income-seeking investors is that, while many share prices and capital values have bounced back from the coronavirus crisis, the dividend drought is far from over. The civil engineer Balfour Beatty (LSE:BBY) and the fund manager Standard Life Aberdeen (LSE:SLA) were just the latest to disappoint shareholders’ hopes of income this week.
The good news is that investment trusts provide a tried-and-tested way to keep the cash coming, with 85% of them maintaining or increasing payouts last year, as the Association of Investment Companies (AIC) announced earlier this week.
That’s important for rising numbers of people, preparing to live off their investments in retirement. Never mind the generalisations, though, this DIY shareholder is delighted to report particular examples of how sustainable income works in practice.
- Nearly nine in 10 investment trusts bucked the dividend cut trend
- F&C hikes dividend for 50th consecutive year
- Murray International raises dividend, but underperforms due to lack of tech
Less than a quarter of the way into this calendar year, no fewer than eight of my investment trusts have sent me money to show they care. Admittedly, the income stream started with more of a dribble than a gush when Worldwide Healthcare (LSE:WWH) coughed up on 11 January.
WWH’s yield of 0.7% is nothing to get excited about but it is rising rapidly - by an average of 15% per annum over the last five years, according to independent statisticians Morningstar. If that rate of ascent is sustained - which is not guaranteed - dividends will double in less than five years. Meanwhile, total returns of 26% over the last year and 499% over the last decade have made WWH my sixth-most valuable holding.
Payouts picked up when Gore Street Energy Storage (LSE:GSF) delivered its quarterly dividend on 15 January. This specialist in industrial batteries aims to smooth out the inevitable fluctuations in wind and solar power. More to the point for this small shareholder, it yields an electrifying 6.7% and happens to be top of the AIC’s Renewable Energy Infrastructure sector over the last year with a total return of 16%.
International Biotechnology (LSE:IBT) was next to give me a boost with its half-yearly dividend on 29 January. One of the winners from Covid, IBT yields 3.7% and delivered total returns of 40% over the last year.
Deeply out-of-favour BlackRock Latin American (LSE:BRLA) did its best to raise this shareholder’s spirits with its 5% yield, dancing into view on 8 February. Even so, total returns of 4.2% over the last year and 25% shrinkage over a decade remain disappointing.
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At the opposite extreme, JPMorgan Japan Small Cap Growth & Income (LSE:JSGI) delivered my biggest dividend cheque of the first quarter on 12 February, due to its combination of a 4% yield and total returns of 46% over the last year.
On the same day, the US Solar Fund (LSE:USF) paid out but, despite management reporting that all assets are operational and aiming for a 5.5% yield, this fund remains work in progress where the dividend delivered fell far short of that. The managers at New Energy Solar tell me that cash flow for this newish fund - launched in April 2019 - is still building toward their target, which they hope to reach later this year.
Another pair of payouts arrived on a single day, 26 February, with Ecofin Global Utilities & Infrastructure (LSE:EGL) and Henderson Far East Income (LSE:HFEL) yielding 4% and an eye-stretching 7.2% respectively. Both pay quarterly dividends, which is helpful for those aiming to live off investment income.
March has been a dry month so far, at least in terms of investment trust dividends, but I note that Jupiter Emerging & Frontier Income (LSE:JEFI) is due to make its next quarterly distribution on 26 March. Its yield of 4.4% is a valuable element in total returns of 13% over the last year.
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As pointed out here before, dreams of capital gains can disappear in a puff of smoke - or a bit of bad news from the other side of the world - but dividends can keep us warm through the coldest winter. Nobody knows what shocks the stock market has in store, but shares that yield an income pay investors to be patient.
Ian Cowie is a freelance contributor and not a direct employee of interactive investor.
Ian Cowie owns shares in Aberdeen Standard European Logistics Income (ASLI); BlackRock Latin American (BRLA); Ecofin Global Utilities & Infrastructure (EGL); Gore Street Energy Storage (GSF); Henderson Far East Income (HFEL); International Biotechnology Trust (IBT); Jupiter Emerging & Frontier Income (JEFI); US Solar Fund (USF); and Worldwide Healthcare (WWH), as part of a globally-diversified portfolio of investment trusts and other shares.
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