If you were picking a new basket of 7/8 ITs for income

[Darka]

One of the data points from the AIC site which seems to get little attention is '5 Year Dividend Growth (%pa)'.
Does it not make sense to aim for a more modest initial dividend, which is growing quickly?
I noticed that many of the ITs mentioned in this thread have very low dividend growth rates. MCT, for example, grew at only 0.4% pa over the past 5 years.

steveal

Indeed it's very important and that is also the reason I didn't buy MCT myself.

[richfool]

One of the data points from the AIC site which seems to get little attention is '5 Year Dividend Growth (%pa)'.
Does it not make sense to aim for a more modest initial dividend, which is growing quickly?
I noticed that many of the ITs mentioned in this thread have very low dividend growth rates. MCT, for example, grew at only 0.4% pa over the past 5 years.

steveal

Indeed it's very important and that is also the reason I didn't buy MCT myself.

I bought into MCT many years ago when the yield was around 6% so I'm not too concerned that they haven't increased the dividend, as I am still receiving that return on my original investment, as well as having made a gain of over 40% gain in my capital investment. MCT also gives exposure to the Canadian dollar.

And before someone says it, - I have no need or wish to take the gain and reinvest elsewhere for a higher income).

[88V8]

One of the data points from the AIC site which seems to get little attention is '5 Year Dividend Growth (%pa)'.
Does it not make sense to aim for a more modest initial dividend, which is growing quickly?
I noticed that many of the ITs mentioned in this thread have very low dividend growth rates. MCT, for example, grew at only 0.4% pa over the past 5 years.

Very true.

But taking a random example of a 4% yield growing at 5%, and a 6% yield growing at 1%, it takes twelve years for the tortoise's annual divi to catch the hare's, and twenty years for the cumulative payout to catch up.

If you're going to start with a low yielder, you'd better be very sure of your growth rate!

V8

[Femi]

Hi all

Did something similar in the last few months with a view to achieving a minimum of 5% income, the "rider" is that I purchased these between March - July 2022 so I am showing current yield here - my actual yield at "my purchase prices" with "my weighting among funds" is 5.86%. You can adapt as you wish. Lots of other options out there as previous posters have indicated.

I wish you luck in your endeavours.

Fund Name (trailing 12 month yield %), (%5 year average yield)

NCYF - New City High Yield (yield % ttm - 8.56) (yield % 5yr Avg - 8.91)
HFEL - Henderson Far East Income (yield % ttm - 8.58) (yield % 5yr Avg - 6.61)
HHI - Henderson High Income (yield % ttm - 5.79) (yield % 5yr Avg - 5.93)
MRCH - Merchants Trust (yield % ttm - 4.79) (yield % 5yr Avg - 5.67)
AEI - Abrdn Equity Income (yield % ttm - 4.86) (yield % 5yr Avg - 4.79)
CTY - City of London (yield % ttm - 4.65) (yield % 5yr Avg - 4.75)
MYI - Murray International (yield % ttm - 4.44) (yield % 5yr Avg - 4.66)

[88V8]

HFEL - Henderson Far East Income (yield % ttm - 8.58) (yield % 5yr Avg - 6.61)

HFEL, also suggested by other posters, is my largest IT holding.
It seemed a great idea, but has been a value destroyer with the SP now roughly where it was in 2015.
I keep thinking it must soon start to recover....

I'm not by any means a TR investor but there are limits.... wish I'd never bought it.

V8

[BullDog]

HFEL - Henderson Far East Income (yield % ttm - 8.58) (yield % 5yr Avg - 6.61)

HFEL, also suggested by other posters, is my largest IT holding.
It seemed a great idea, but has been a value destroyer with the SP now roughly where it was in 2015.
I keep thinking it must soon start to recover....

I'm not by any means a TR investor but there are limits.... wish I'd never bought it.

V8

My guess is that you are not alone. Apparently it's a vehicle that converts your capital into income and charges you for the privilege (at least it is in more recent times). It's exactly the kind of thing I suggest the OP steers clear of in this portfolio. There's no free lunches in generating an income stream from equities.

[Femi]

HFEL - Henderson Far East Income (yield % ttm - 8.58) (yield % 5yr Avg - 6.61)

HFEL, also suggested by other posters, is my largest IT holding.
It seemed a great idea, but has been a value destroyer with the SP now roughly where it was in 2015.
I keep thinking it must soon start to recover....

I'm not by any means a TR investor but there are limits.... wish I'd never bought it.

V8

My guess is that you are not alone. Apparently it's a vehicle that converts your capital into income and charges you for the privilege (at least it is in more recent times). It's exactly the kind of thing I suggest the OP steers clear of in this portfolio. There's no free lunches in generating an income stream from equities.

As I said in my post people will need to determine weighting of each for themselves. In my case HFEL is 4% of the portfolio - for the reasons you’ve both outlined, but I am happy with that for the Far East exposure. If it retains it’s initial value over time and gives me 8% income per year I’ll live with it.

[Padders72]

88V8, I am glad I have more in HFEL than AXI at present. I am barely break even in HFEL before dividends, but a shed load down on AXI which I see you mentioned earlier as a good buy, is that a doubling down thing on the basis it can't fall any further

[moorfield]

HFEL - Henderson Far East Income (yield % ttm - 8.58) (yield % 5yr Avg - 6.61)

HFEL, also suggested by other posters, is my largest IT holding.
It seemed a great idea, but has been a value destroyer with the SP now roughly where it was in 2015.
I keep thinking it must soon start to recover....

I'm not by any means a TR investor but there are limits.... wish I'd never bought it.

V8

So if not for TR, why did you buy HFEL originally? (Disclosure: interested HFEL newbie)

[steveal]

One of the data points from the AIC site which seems to get little attention is '5 Year Dividend Growth (%pa)'.
Does it not make sense to aim for a more modest initial dividend, which is growing quickly?
I noticed that many of the ITs mentioned in this thread have very low dividend growth rates. MCT, for example, grew at only 0.4% pa over the past 5 years.

Very true.

But taking a random example of a 4% yield growing at 5%, and a 6% yield growing at 1%, it takes twelve years for the tortoise's annual divi to catch the hare's, and twenty years for the cumulative payout to catch up.

If you're going to start with a low yielder, you'd better be very sure of your growth rate!

V8

V8,

An excellent point, and the effect of high initial yield is much more pronounced that I would have thought. (Excel confirmed)

Steve

[88V8]

88V8, I am glad I have more in HFEL than AXI at present. I am barely break even in HFEL before dividends, but a shed load down on AXI which I see you mentioned earlier as a good buy, is that a doubling down thing on the basis it can't fall any further

Pretty much. I/we bought AXI on the false premise that they would somehow avoid the almost inevitable falls in FI, but the falls seem to have finished... fttb... perhaps with the market betting that the CBs will chicken out of meaningful rate rises, and it seems likely that AXI will now begin to rise. So now it's a Buy.
Timing... not only crucial on Strictly.

HFEL - Henderson Far East Income (yield % ttm - 8.58) (yield % 5yr Avg - 6.61)

HFEL... seemed a great idea, but has been a value destroyer ... wish I'd never bought it.

So if not for TR, why did you buy HFEL originally? (Disclosure: interested HFEL newbie)

Diworsification... yield....

Some might say that I should have stuck with CTY.

V8

[vand]

I recently bought some HFEL and then almost immediately regretted it, as I see from their list of top 10 holdings that none of them are actually paying out anything like the dividend yield that the trust pays out.. therefore its clear that they have a strategy of selling down capital to meet the "dividend" payout.

[Dod101]

I recently bought some HFEL and then almost immediately regretted it, as I see from their list of top 10 holdings that none of them are actually paying out anything like the dividend yield that the trust pays out.. therefore its clear that they have a strategy of selling down capital to meet the "dividend" payout.

Yes a bit of research could have told you that. They also write options I think. This is all reflected in the share price. Not much point in having a big yield and a share price that keeps on dropping. As I have often said , 'Dearly bought income'.

Lessons there.

1. Do some research before buying.
2. Do not chase yield.

Dod

[Arborbridge]

I recently bought some HFEL and then almost immediately regretted it, as I see from their list of top 10 holdings that none of them are actually paying out anything like the dividend yield that the trust pays out.. therefore its clear that they have a strategy of selling down capital to meet the "dividend" payout.

Don't be too hasty to condemn - give it some time. ITs do vary over time so don't judge by one short period, and if you balance your portfolio with other ITs the effect is diluted if you back a dud. Most ITs are not actually "duds" - it's more they have different purposes. A highish yield with static or reducing capital might be critical for someone in their dotage, compared with youngsters who want low yield and high TR.

TR of HFEL has been 5.9% pa over 10years. Not sure what it's official average yield has been, but my records suggest between 5.3% and 6.8%. It's higher than usual at the moment, I think. Maybe it was actually a good time to buy....

Arb.

[Darka]

Don't be too hasty to condemn - give it some time. ITs do vary over time so don't judge by one short period..
Arb.

Indeed, I have HFEL (7.3% of my portfolio) and although not thrilled with the capital performance I see them as a useful part of my overall holdings.
It's easy to say that we'd be better off with this or that investment, with hindsight of course and this years dogs can be next year's heroes.

As part of a diverse portfolio, you can't expect everything to shine all the time and jumping from one investment to another to chase that ideal is foolish, costly and doesn't work.

I wouldn't want to only hold HFEL, but as a holding in a much bigger portfolio I'm much more sanguine about it.

[moorfield]

I recently bought some HFEL and then almost immediately regretted it, as I see from their list of top 10 holdings that none of them are actually paying out anything like the dividend yield that the trust pays out.. therefore its clear that they have a strategy of selling down capital to meet the "dividend" payout.

I have read its last annual report and am a little puzzled by this comment.

2021 Investment Income £37,236m, Equity Dividends Paid £34,040m
2020 Investment Income £35,344m, Equity Dividends Paid £31,651m

Where is the selling down of capital going on here?

[BullDog]

I recently bought some HFEL and then almost immediately regretted it, as I see from their list of top 10 holdings that none of them are actually paying out anything like the dividend yield that the trust pays out.. therefore its clear that they have a strategy of selling down capital to meet the "dividend" payout.

I have read its last annual report and am a little puzzled by this comment.

2021 Investment Income £37,236m, Equity Dividends Paid £34,040m
2020 Investment Income £35,344m, Equity Dividends Paid £31,651m

Where is the selling down of capital going on here?

A guess. The reported investment income received includes that generated by their financial engineering activities? It's still investment even if it's not direct equity or bond investment?

[moorfield]

A guess. The reported investment income received includes that generated by their financial engineering activities? It's still investment even if it's not direct equity or bond investment?

All the footnote (3) states is "All of the above income is derived from equity related investments." Perhaps an accountant or auditor here can help us here whether realised gains/losses are permitted to be restated as "investment income". I would have thought that is a big no no? If it isn't the case then I think we can read that HFEL has been well able cover dividend outflow from inflow for the last 2 years. I haven't looked further back than that.

[richfool]

I would probably start with JGGI, LWDB and MRCH. Perhaps a sprinkling of MCT too. Thinking being that it's probably better to look beyond the UK as well as the "usual suspects" in an income or income/growth IT portfolio. Hope that helps.

Hmm, with the brief being 4-5%, there's only one there that would suffice at the moment.

Arb.

Depends when you buy though. I have all of them and all yielding North of 4%. There is a requirement not to eat capital. That really mandates a nearer to 4% rather than 5% yield in my experience. It seldom pays to reach for high yield in the long term would be my thinking.

Depends when you buy though.

This is called "changing the goalposts" in a discussion. The OP specified 4-5% yield, and I think the implcation was "now", not at some point in the past. You could have added a rider to make the recommendation valid such as "These would be worth keeping an eye on in future to buy if their yield comes within your requirement."

My comment was factual: it does not need a further meta-discussion.

Arb.

Arb, I've just been re-reading this thread for any ideas it might give me and noted your extended comment about the OP having specified a 4-5% yield and suggesting that a respondent was "changing the goalposts" (with his recommendations). I hope you won't mind me saying, but I have to say I felt you were being a bit harsh with your comments. The OP did use the word "approx" (see quote below).

Also, we all know that yields vary as the SP varies, so they will vary on a daily basis (and indeed throughout the day). It wasn't if the suggestions made by the respondent were markedly different, or related to growth trusts instead of dividend payers. I think all the suggestions were appropriate and in the ballpark, so to speak.

Targeting approx 4-5% yield, looking for a steadily growing income stream, without consuming its own capital.
A basket to last you 30 years.

[Arborbridge]

I would probably start with JGGI, LWDB and MRCH. Perhaps a sprinkling of MCT too. Thinking being that it's probably better to look beyond the UK as well as the "usual suspects" in an income or income/growth IT portfolio. Hope that helps.

Hmm, with the brief being 4-5%, there's only one there that would suffice at the moment.

Arb.

Depends when you buy though. I have all of them and all yielding North of 4%. There is a requirement not to eat capital. That really mandates a nearer to 4% rather than 5% yield in my experience. It seldom pays to reach for high yield in the long term would be my thinking.

Depends when you buy though.

This is called "changing the goalposts" in a discussion. The OP specified 4-5% yield, and I think the implcation was "now", not at some point in the past. You could have added a rider to make the recommendation valid such as "These would be worth keeping an eye on in future to buy if their yield comes within your requirement."

My comment was factual: it does not need a further meta-discussion.

Arb.

Arb, I've just been re-reading this thread for any ideas it might give me and noted your extended comment about the OP having specified a 4-5% yield and suggesting that a respondent was "changing the goalposts" (with his recommendations). I hope you won't mind me saying, but I have to say I felt you were being a bit harsh with your comments. The OP did use the word "approx" (see quote below).

Also, we all know that yields vary as the SP varies, so they will vary on a daily basis (and indeed throughout the day). It wasn't if the suggestions made by the respondent were markedly different, or related to growth trusts instead of dividend payers. I think all the suggestions were appropriate and in the ballpark, so to speak.

Targeting approx 4-5% yield, looking for a steadily growing income stream, without consuming its own capital.
A basket to last you 30 years.

I didn't mean to be harsh. When I glanced at the recommensation and found they were yielding less than the range given, I just thought it worth noting that the OPs specification was being ignored. But as you say, there is the word "approx".