Dividends are being cut by many of Britain’s biggest companies, but investment trusts are still delivering inflation-busting income to shareholders willing to accept some risk. As I know from personal experience, overlooked funds in unfashionable sectors can produce capital growth as well as a decent yield, despite all the woes of the coronavirus crisis.
Back when life was ‘normal’ (three months ago, although it feels like three decades ago), I wrote a column for this publication about how difficult sourcing sustainable income was for investors.
Years of financial repression from central banks, far too much ‘loose money’ chasing too few assets and expensive valuations have made the income-hunting landscape for investors in most asset classes pretty barren. What investors really needed was a fall in asset values and an increase in yields to ease the negative side-effects of the zero interest rate world we faced.
Funds Fan: fallen-star fund manager exits, trust dividend cuts, and an interview with a top UK investor
Faith Glasgow, editor of Money Observer, and deputy editor Kyle Caldwell discuss the departure of Neil Woodford mentee Mark Barnett, who has left Invesco after 24 years. The pair also examine the scale of dividend cuts among investment trusts, and one fund that has yet to suffer any dividend cuts among its holdings. They later talk to Stuart Widdowson, manager of Odyssean Investment Trust, about the market sell-off, top holdings, and investment opportunities.
David Prosser, former business editor of The Independent and a regular contributor to Money Observer, joins editor Faith Glasgow and staff writer Tom Bailey for a podcast debating how to play investment themes in the aftermath of Covid-19, equity income fund options, and strategies for income-seekers.
Since the start of March, the vast majority of investment trusts have not announced changes to their dividend policies in response to the coronavirus pandemic.
Figures from broker Winterflood show 32 dividend announcements have been made by trusts to either cut, suspend or entirely remove income payments to shareholders (up to 25 May).
The coronavirus pandemic has resulted in economies around the world going into shutdown, and with economic activity falling, companies have seen their revenues diminish. This has repercussions for their ability to pay dividends.
It should not surprise investors that many companies are cutting or suspending their dividend this year.
Countries around the world are facing severe recessions, and as a result many companies feel the need to hold back all or some of the capital they had previously planned to hand over to shareholders. This is what we should expect in a recession.
FTSE 100 tobacco giant Imperial Brands has slashed its dividend by a third as it prepares for a further hit to profitability from the coronavirus crisis.
Many income-focused fund managers would probably rather forget the past three months, with scores of once reliable dividend-payers cutting or suspending millions of pounds in payouts.