Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to Howard,Bhoddhisatva,penym,Anonymous,Rhyd6, for Donating to support the site

Income Investment Trusts - are these the times they (relatively...) shine?

General discussions about equity high-yield income strategies
Dod101
Lemon Quarter
Posts: 4953
Joined: October 10th, 2017, 11:33 am
Has thanked: 1031 times
Been thanked: 1891 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294067

Postby Dod101 » March 25th, 2020, 2:54 pm

JuanDB wrote:CTY is due for its annual increase next dividend payment. It will be interesting to see the level of increase as a measure of confidence given their 54 year run of increases.

Current dividend is 0.0475
I would consider par to be 0.0495 (this is the value I have pencilled in my “growth projection” spreadsheet)
0.05 would be generous and I’d be very surprised given the current climate
Less than 0.0495 would be a warning sign for me.


Don't forget that ITs need to pay out a minimum of 85% of their earnings in any one year to maintain IT status so that puts a floor under the dividend. Anything over that is a bonus to my mind. At this time, ITs should be reporting good income as it reflects the past 12 months but going forward? If I were running an income IT I would be cautious because there looks to be not much doubt that dividends as a whole will be well down in the next 12 months. Just look at the growing list of cuts and suspensions. However, CTY as a long record of dividend increases and that will obviously influence their their thoughts. I am not sure though that an increase on last year should be seen as a sign of confidence but rather a desire to keep their dividend record intact. They can of course use their Revenue Reserves to supplement current income and help to bridge any shortfall. I don't think you need a warning sign for CTY; it is all around us at the moment.

Dod

monabri
Lemon Quarter
Posts: 3719
Joined: January 7th, 2017, 9:56 am
Has thanked: 426 times
Been thanked: 1091 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294079

Postby monabri » March 25th, 2020, 3:24 pm

JuanDB wrote:CTY is due for its annual increase next dividend payment. It will be interesting to see the level of increase as a measure of confidence given their 54 year run of increases.

Current dividend is 0.0475
I would consider par to be 0.0495 (this is the value I have pencilled in my “growth projection” spreadsheet)
0.05 would be generous and I’d be very surprised given the current climate
Less than 0.0495 would be a warning sign for me.


I think it might be prudent to set your expectations a bit lower ..I can't see them raising the divi by 4.2% ...maybe a 1% or 2% max increase ?

nmdhqbc
Lemon Slice
Posts: 314
Joined: March 22nd, 2017, 10:17 am
Has thanked: 41 times
Been thanked: 83 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294088

Postby nmdhqbc » March 25th, 2020, 3:36 pm

monabri wrote:
JuanDB wrote:CTY is due for its annual increase next dividend payment. It will be interesting to see the level of increase as a measure of confidence given their 54 year run of increases.

Current dividend is 0.0475
I would consider par to be 0.0495 (this is the value I have pencilled in my “growth projection” spreadsheet)
0.05 would be generous and I’d be very surprised given the current climate
Less than 0.0495 would be a warning sign for me.


I think it might be prudent to set your expectations a bit lower ..I can't see them raising the divi by 4.2% ...maybe a 1% or 2% max increase ?


Looking at financial years I have data from 2002 onwards below. So 1.64% and 2.76% seem to be the lowest increases in recent ish times...

2002 £7.94
2003 £8.07 1.64%
2004 £8.33 3.22%
2005 £8.62 3.48%
2006 £9.36 8.58%
2007 £10.30 10.04%
2008 £11.60 12.62%
2009 £12.32 6.21%
2010 £12.66 2.76%
2011 £13.20 4.27%
2012 £13.74 4.09%
2013 £14.30 4.08%
2014 £14.76 3.22%
2015 £15.30 3.66%
2016 £15.90 3.92%
2017 £16.70 5.03%
2018 £17.70 5.99%
2019 £18.60 5.08%

Dod101
Lemon Quarter
Posts: 4953
Joined: October 10th, 2017, 11:33 am
Has thanked: 1031 times
Been thanked: 1891 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294090

Postby Dod101 » March 25th, 2020, 3:42 pm

CTY has never attracted me because quite a lot of their holdings I am holding directly and I do not ned the accumulation but I must say that that is an impressive record of their dividend increases, so maybe I am being unduly pessimistic. Good luck to you.

Dod

88V8
Lemon Slice
Posts: 753
Joined: November 4th, 2016, 11:22 am
Has thanked: 88 times
Been thanked: 164 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294232

Postby 88V8 » March 25th, 2020, 8:07 pm

Dod101 wrote:They can of course use their Revenue Reserves to supplement current income and help to bridge any shortfall.


As a relatively new IT investor - do hold CTY - what did ITs in general do in 08?
Did they burn up their reserves, which presumably are there for times of famine, or did they cut or hold?

V8

Also holding HFEL, BERI, MUT, MRCH.

Dod101
Lemon Quarter
Posts: 4953
Joined: October 10th, 2017, 11:33 am
Has thanked: 1031 times
Been thanked: 1891 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294242

Postby Dod101 » March 25th, 2020, 8:44 pm

Some just kept churning out the dividends at a gently increasing pace as I recall. As I said maybe earlier in this thread, the 85% that they are required to pay out is a useful floor, and of course nowadays they can also distribute their realised capital gains so there really is not too much constraint on most to keep dividends increasing if they have a mind to do so.

That is not an answer to your question but the fact is I do not recall what most of them did.

Dod

scrumpyjack
Lemon Slice
Posts: 902
Joined: November 4th, 2016, 10:15 am
Has thanked: 36 times
Been thanked: 319 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294250

Postby scrumpyjack » March 25th, 2020, 8:53 pm

CTY has one of the lower levels of reserves out of which to pay divis (but still 0.8 years)
https://citywire.co.uk/investment-trust ... s/a1278856

I would expect most of the longer established ITs to at least maintain their divis for at least a year to support one of their main selling points - stability through the cycle.

It is not as if ITs have the problems that trading companies do. As long as they have the cash to pay the divi and it is within their current year income plus accumulated reserves, they can pay it.

Then if the economy recovers in a year or two they can bleat again about how much better they are than unit trusts or ETFs

JuanDB
2 Lemon pips
Posts: 120
Joined: August 15th, 2018, 9:31 pm
Has thanked: 31 times
Been thanked: 47 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294252

Postby JuanDB » March 25th, 2020, 8:54 pm

The AIC website lists dividends going back to the 1970s so you can take a look for trusts you hold. That’s the only consolidated source across trusts that I am aware of albeit you have to look at each trust individually.

The AIC also publish their dividend heroes list. 2019 edition here https://www.theaic.co.uk/aic/news/press-releases/investment-company-dividend-heroes

Cheers,

Juan

JuanDB
2 Lemon pips
Posts: 120
Joined: August 15th, 2018, 9:31 pm
Has thanked: 31 times
Been thanked: 47 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294255

Postby JuanDB » March 25th, 2020, 8:59 pm


richfool
Lemon Quarter
Posts: 2006
Joined: November 19th, 2016, 2:02 pm
Has thanked: 375 times
Been thanked: 351 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294283

Postby richfool » March 25th, 2020, 10:42 pm

I notice MYI (which I reduced my holding of last year due to its poor capital performance), is currently yielding 8.1% and according to HL is at a discount of a similar amount. Though I'm not sure of the implications of its fixed interest holdings.

https://www.hl.co.uk/shares/shares-sear ... -25p-share

monabri
Lemon Quarter
Posts: 3719
Joined: January 7th, 2017, 9:56 am
Has thanked: 426 times
Been thanked: 1091 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294288

Postby monabri » March 25th, 2020, 11:02 pm

richfool wrote:I notice MYI (which I reduced my holding of last year due to its poor capital performance), is currently yielding 8.1% and according to HL is at a discount of a similar amount. Though I'm not sure of the implications of its fixed interest holdings.

https://www.hl.co.uk/shares/shares-sear ... -25p-share


I noticed that but I believe that the 8% yield quoted by HL is incorrect....more like 6.1% based on 874p


https://www.dividenddata.co.uk/dividend ... alDiv=true

77ss
Lemon Slice
Posts: 920
Joined: November 4th, 2016, 10:42 am
Has thanked: 62 times
Been thanked: 188 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294322

Postby 77ss » March 26th, 2020, 7:34 am

88V8 wrote:
Dod101 wrote:They can of course use their Revenue Reserves to supplement current income and help to bridge any shortfall.


As a relatively new IT investor - do hold CTY - what did ITs in general do in 08?
Did they burn up their reserves, which presumably are there for times of famine, or did they cut or hold?

V8

Also holding HFEL, BERI, MUT, MRCH.


Clearly some ITs continued to raise their dividends. Check our the following - which includes some of your holdings:

https://www.theaic.co.uk/aic/news/press ... end-heroes

Dod101
Lemon Quarter
Posts: 4953
Joined: October 10th, 2017, 11:33 am
Has thanked: 1031 times
Been thanked: 1891 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294327

Postby Dod101 » March 26th, 2020, 7:45 am

77ss wrote:Clearly some ITs continued to raise their dividends. Check our the following - which includes some of your holdings:

https://www.theaic.co.uk/aic/news/press ... end-heroes


Yes but most of these set their dividend increases before the full effect of the coronavirus was evident. I know that was the case with Alliance for instance. What will be interesting will be whether they can or will chose to do that come the interims. Most certainly will if they possible can I am sure for all the reasons already discussed.

Dod

Bagger46
Lemon Pip
Posts: 62
Joined: August 10th, 2019, 4:40 pm
Has thanked: 27 times
Been thanked: 67 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294331

Postby Bagger46 » March 26th, 2020, 7:51 am

I have always considered that, in particular for a retiree on say tighter means taking income, ITs are highly suitable, and much safer than a collection of HY shares.

We don’t need the income at all ourselves, but do re invest reasonably good yields in our ISAs. In the financial crisis, my wife’s essentially IT based ISAs dividend flow hardly dipped, and in fact had, net of RPI, fully recovered within 14 months of her divi per inc unit min. By contrast, in my essentially individual shares multi cap based ISA, my divi per inc unit dipped by 27%, and took 30 months to recover, although I see many HYPERs fared even worse.

Yesterday, on of my wife’s IT holdings announced, up. I don’t expect all her ITs to announce up this time, but I don’t expect many bad cutters at all.

Bagger

77ss
Lemon Slice
Posts: 920
Joined: November 4th, 2016, 10:42 am
Has thanked: 62 times
Been thanked: 188 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294387

Postby 77ss » March 26th, 2020, 9:54 am

Dod101 wrote:
77ss wrote:Clearly some ITs continued to raise their dividends. Check our the following - which includes some of your holdings:

https://www.theaic.co.uk/aic/news/press ... end-heroes


Yes but most of these set their dividend increases before the full effect of the coronavirus was evident. I know that was the case with Alliance for instance. What will be interesting will be whether they can or will chose to do that come the interims. Most certainly will if they possible can I am sure for all the reasons already discussed.

Dod


I was answering the question about what happened in 2008! Your point is true, but hardly germane.

Dod101
Lemon Quarter
Posts: 4953
Joined: October 10th, 2017, 11:33 am
Has thanked: 1031 times
Been thanked: 1891 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294393

Postby Dod101 » March 26th, 2020, 10:06 am

77ss wrote:
Dod101 wrote:
77ss wrote:Clearly some ITs continued to raise their dividends. Check our the following - which includes some of your holdings:

https://www.theaic.co.uk/aic/news/press ... end-heroes


Yes but most of these set their dividend increases before the full effect of the coronavirus was evident. I know that was the case with Alliance for instance. What will be interesting will be whether they can or will chose to do that come the interims. Most certainly will if they possible can I am sure for all the reasons already discussed.

Dod


I was answering the question about what happened in 2008! Your point is true, but hardly germane.


Sorry but I was thrown by the date of your link. Anyway then was then and now we have a completely different set of circumstances.

Dod

forrado
2 Lemon pips
Posts: 140
Joined: May 16th, 2017, 7:41 pm
Has thanked: 4 times
Been thanked: 132 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294625

Postby forrado » March 27th, 2020, 1:04 am

While it remains to be seen which income producing ITs will buckle under a wave of predicted dividend cuts. Such ITs that have been hailed by the media as ‘dividend heroes’ will be fighting tooth and nail to protect their ‘badge of honour’ status. Boards will not want to be seen to be disgraced and forced to yield in the eyes of their shareholders, and investors in general, after decades spent building dividend hero reputations.

Itsallaguess
Lemon Quarter
Posts: 4645
Joined: November 4th, 2016, 1:16 pm
Has thanked: 1832 times
Been thanked: 3207 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294633

Postby Itsallaguess » March 27th, 2020, 5:24 am

forrado wrote:
While it remains to be seen which income producing ITs will buckle under a wave of predicted dividend cuts.

Such IT's that have been hailed by the media as ‘dividend heroes’ will be fighting tooth and nail to protect their ‘badge of honour’ status.

Boards will not want to be seen to be disgraced and forced to yield in the eyes of their shareholders, and investors in general, after decades spent building dividend hero reputations.


And on that specific point, I've now started an income-IT-specific 'virus-related-cutters' thread, linked below, to hopefully capture any income-related Investment Trusts who start to announce any virus-related cuts, similar to the great 'single-company-cutters' thread that's been progressing over on HYP Practical.

Link here to the income-IT thread -

https://www.lemonfool.co.uk/viewtopic.php?f=31&t=22542&p=294631#p294631

Cheers,

Itsallaguess

Julian
Lemon Slice
Posts: 655
Joined: November 4th, 2016, 9:58 am
Has thanked: 170 times
Been thanked: 217 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294693

Postby Julian » March 27th, 2020, 9:38 am

forrado wrote:While it remains to be seen which income producing ITs will buckle under a wave of predicted dividend cuts. Such ITs that have been hailed by the media as ‘dividend heroes’ will be fighting tooth and nail to protect their ‘badge of honour’ status. Boards will not want to be seen to be disgraced and forced to yield in the eyes of their shareholders, and investors in general, after decades spent building dividend hero reputations.

I think that is so right forrado. I posted the same thoughts, rather less succinctly, on the previous page of this thread. To me, at least in the UK market, City of London IT (CTY) seems the most extreme example of this with the longest record, 50-something years of rising (I believe) dividends to protect. I do not think the board will want to break that record and might take quite extreme measures to maintain it.

Once dividends coming in from the underlying portfolio are no longer sufficient to maintain the absolute minimum dividend needed for CTY to keep its run of rising dividends going (declaring next year a dividend of 100.001% of the previous year for instance so essentially a freeze plus a minuscule increase to keep the "rising" bit going) then of course it has to dip into the reserve to keept distributions at the level it wants but I believe it is entirely possible that the shortfall in dividends might be deep and prolonged enough for the entire reserve to be eaten up. That is where things get interesting for ITs like CTY. At that point just how 'tooth and nail' will the board's fight become? Will they be willing to eat into the capital of the core portfolio to weather out the rest of the storm?

Obviously no one knows the answer to the above, even the CTY board probably doesn't know until it is actually confronted with such a decision and has data on exactly how deep and protracted such a dip into portfolio capital might be needed before a minimum of 1.0 cover is again seen, but to me that is the point where the really interesting (not necessarily in a good way!) decisions start being made. My hunch is that they would eat into capital for at least a year especially if, at the time that decision needs to be made, they thought that the end of the dividend drought from the underlying portfolio was in sight.

- Julian

mike
Lemon Slice
Posts: 447
Joined: November 19th, 2016, 1:35 pm
Has thanked: 4 times
Been thanked: 161 times

Re: Income Investment Trusts - are these the times they (relatively...) shine?

#294697

Postby mike » March 27th, 2020, 9:54 am

Some encouraging news from Scottish American (SAIN, formerly SCAM)

As you will be aware, SAINTS had previously announced its intention to pay a final dividend of 3.00p per ordinary share in respect of its financial year ended 31 December 2019. In view of the postponement of the AGM, at which shareholders' approval for this final dividend was to have been sought, the Directors have resolved that the final dividend will instead be paid to SAINTS' shareholders as a fourth interim dividend of 3.00p per share. The timetable for this further interim dividend will be the same as previously planned for the final dividend and so it will be paid on 9 April 2020, to shareholders on the register at the close of business on 6 March 2020, with the ex-dividend date being 5 March 2020.

In light of this dividend being paid out to shareholders as a fourth interim dividend, the Board does not anticipate the need for any shareholder approval in relation to a final dividend payment at the AGM and so intends to withdraw such resolution at the AGM when it is held.


https://www.investegate.co.uk/scot-american-inv---sain-/rns/annual-general-meeting---arrangements/202003270927338580H/


Return to “High Yield Shares & Strategies - general”

Who is online

Users browsing this forum: jenticott1 and 3 guests