Stormy equity markets the past three months have impacted on the share prices of many investment trusts, pushing dividend yields upwards - and throwing out new opportunities for income-seekers.
According to a new report from broker Stifel, there are now 21 equity-focused closed-ended funds with assets under management of £80 million plus that are yielding more than 4 per cent – up from 13 six months ago in September and 11 in March 2017. Trust numbers have been further boosted by changes in policy for two trusts that have recently adopted a high-yield investment strategy and now feature in the table.
At the same time share price discounts to the underlying asset value have tended to widen over the period, offering an attractive opportunity for income investors to top up or expand their portfolios.
Increases in yield are evident across a broad swathe of sectors. Unsurprisingly, given the fact that domestic markets have fallen so heavily out of favour with international investors over recent months, more than half of the table are UK-oriented trusts.
They include newcomers Schroder Income Growth (4.2 per cent yield) and Money Observer Rated Fund Invesco Perpetual UK Smaller Companies, which has recently adopted a more dividend-focused policy and now pays 4.1 per cent. It has boosted its payouts by 22 per cent over the past year and is prepared to supplement dividend takings with capital if need be. Several other trusts in the list have also adopted dividend-boosting policies, including Baring Emerging Europe (on a 4.3 per cent yield) and JP Morgan Asian.
Other UK-focused Rated Fund members worth noting on the list include City of London (4.2 per cent yield), which has grown its dividends for more than 50 consecutive years, and Shires Income, yielding 4.7 per cent, though this latter sits on a 2 per cent premium.
Asian funds are also in evidence, in the shape of Henderson Far East Income, on a 3 per cent premium but producing a meaty 5.9 per cent yield. Aberdeen Asian Income and JPMorgan Asian, meanwhile, are both on a 4.4 per cent yield and offer better value in discount terms as they sit on high single-figure discounts.
The top-yielding equity trust, however is Money Observer Rated Fund European Assets, paying 6.3 per cent and sitting on a modest 0.5 per cent premium. It pays its dividend primarily from capital and the board resets the dividend level each year. Stifel says that the forecast for 2018 amounts to a 6.3 per cent payout.
Keep up to date with all the latest financial news and investment tips by signing up to our newsletter. Email subscribers will also receive a free print copy of Money Observer magazine.
Subscribe to Money Observer Magazine
Be the first to receive expert investment news and analysis of shares, funds, regions and strategies we expect to deliver top returns, plus free access to the digital issues on your desktop or via the Money Observer App.Subscribe now