torata wrote:88V8 wrote:
It may seem a silly question, but what is the advantage of this variety of IT?
And as I write it occurs to me and I shall look tomorrow, are any of them AIC Dividend Heroes?
From memory European Assets Trust (EAT) moved to this format a few years ago, and their rationale was that it allowed them greater scope of investment opportunities, not having to limit themselves to companies paying a divided. (But I note their dividend is still below 2017 amount)
I think the rationale from other traditionally non-dividend paying IT's was that it makes them more attractive to a wider group of retail investors.
Whether it's an advantage to the investor or not, I don't know.
As an income-investor primarily, this evolution of the income-investment landscape makes a lot of sense to me, as it starts to close what many people might see as a 'gap' between the 'income investment' and the 'total return' spheres, whilst still looking to maintain many of the attractions of the 'income-related' options that some of us look for...
If income-investing is often popular because it simply 'delivers' dividend income to investors that has been pooled from a diverse set of underlying investments, without the need for owners of those IT's to
personally have to consider how that delivered-income is 'generated', then the obvious question to then ask might be why those
underlying investments have to
necessarily all be 'dividend generating' options themselves...
If more ''growthy' areas of the market can be accessed by the investment managers of these '%-NAV' dividend-paying IT's, where they are able to manage those underlying 'growthy investments' themselves in a way that is ultimately 'invisible' to the income-investor who owns those IT's, and where the income-investor who owns them still hopefully
sees long-term, reliable, and hopefully steadily growing dividend-income from them, then this investment-market development might well turn into a very useful 'sweet-spot option' for those of us who don't necessarily look to 'chase' particularly high-yields for our income-investments, but would welcome some relatively lower yields, so long as the underlying 'dividend-delivery' of those holdings was maintained in as seamless a way as possible, whilst also now being able to discover wider areas of the 'growthy' market that were otherwise difficult to access...
In addition to the above, one of the often valid criticisms of many income-related Investment Trusts is that whilst they might continue to deliver on the income front, over many years the share price of the IT's themselves often languish with low returns in a capital sense. Income-related IT's that might look to enter this '% NAV dividend' sphere, and which perhaps operate in some of the more 'growthy' areas of the global markets, might well start to deliver respectable returns in
both areas, with underlying dividend returns being acceptable to the owners of them
at the same time as seeing IT share-prices rise in relation to any underlying rise in those 'more growthy' NAV's, so again, this might begin to look like a potential 'sweet spot' area that income-investors who ultimately don't wish to make regular granular investment decisions might wish to take an interest in...
If I can be pardoned for going slightly off-topic for a short time, this '% NAV dividend-income' development, along with the longer term one where many income-investors have been enjoying the dividends from highly diverse income-related Investment Trusts for many years, is one of the primary reasons that I moved away from the vanilla HYP strategy many years ago, as I felt that sticking with single-share holdings for dividend-delivery forced income-investors to paint themselves into a smaller and smaller part of the maturing investment universe, and denying ourselves important
wider options as sectors and markets opened themselves up in
exactly these ways, whilst still maintaining the important underlying 'income-delivery processes' that were, for me at least, the primary attraction of the approach....
The income-investment world keeps developing - why choose to fight that, and not perhaps take
advantage of it....?
Cheers,
Itsallaguess