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HL IT Recommendation for Income CTY, MYI, HICL

Closed-end funds and OEICs
hassettp
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HL IT Recommendation for Income CTY, MYI, HICL

#411379

Postby hassettp » May 12th, 2021, 2:20 pm

Hi
Hargreaves Lansdown recently recommended the following Investment Trust fro income:

City of Lonndon IT CTY 4.92%
Murray International Trust MYI 4.49%
HICL Infrastructure HICL 4.85%

The yield is tempting. I would appreciate people's views on these ITs. I'm looking for income and am not too bothered about growth.

Peter

jonesa1
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Re: HL IT Recommendation for Income CTY, MYI, HICL

#411403

Postby jonesa1 » May 12th, 2021, 3:55 pm

hassettp wrote:
City of Lonndon IT CTY 4.92%
Murray International Trust MYI 4.49%
HICL Infrastructure HICL 4.85%

I'm looking for income and am not too bothered about growth.



Based on recent performance, you shouldn't expect much growth from any of them.

The CTY manager will do everything in his power to keep raising the dividend, but maybe at below inflation rates for a few years (unless FTSE earnings improve markedly) and possibly at the expense of the NAV. Total return has been pretty poor recently, it's lagged the FTSE 100 index over 5 years, but beaten it over 10.

HICL is likely to keep churning out the dividend for a few years, but over the longer term could be sensitive to changes in the political wind (its NAV dropped a fair bit when it looked like Corbyn had a chance of becoming PM) and isn't likely to show a lot of growth.

If Bruce Stout's belief, that the Western economies are about to collapse and reality based economies are only to be found in developing countries, comes to pass, MYI's capital performance could improve markedly. The recent capital performance hasn't been great, but the dividend has held up well, whether that will continue is anyone's guess. It's rather different to most other global trusts, so could be useful to hold (alongside a more typical global trust) simply for that reason.

Dod101
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Re: HL IT Recommendation for Income CTY, MYI, HICL

#411420

Postby Dod101 » May 12th, 2021, 4:36 pm

I hold only Murray International of the three. City of London is under a lot of pressure and is using its revenue reserves to support its dividend (as are a lot of other trusts at the moment) HICL is an infrastructure trust which is always subject to political buffeting. However if as you say you are not bothered about capital growth you might as well just take the highest yielder. I tend these days to look at total return and so prefer Murray International. The market is quite discerning and leaves some ITs with a higher yield for a reason.

Dod

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Re: HL IT Recommendation for Income CTY, MYI, HICL

#411431

Postby monabri » May 12th, 2021, 5:09 pm

HICL : Wouldn't the attractiveness (i.e. share price) be reduced if interest rates were to increase? Is it a bond proxy? Could it be expensively bought income?

https://www.theaic.co.uk/companydata/0P00008F9F

"Divi cover" as defined by the AIC is reported at 0.00 years - I also note the 7% premium to NAV but that has been reducing.

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Re: HL IT Recommendation for Income CTY, MYI, HICL

#411503

Postby 88V8 » May 12th, 2021, 10:45 pm

monabri wrote:"Divi cover" as defined by the AIC is reported at 0.00 years

Someone mentioned recently that the divi cover in Infrastructure trusts is usually zero.
Which is one reason I hold none.

For income I have ASEI, BERI, CMHY, CTY, HFEL, JCH, JETI, LWDB, MCT, MRCH, MUT, NCYF, SHRS, a mixture of Sturdies and diversifications that I hope will tick along reliably, albeit not expecting much growth.

Been buying opportunistically when they're not at a premium.

V8

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Re: HL IT Recommendation for Income CTY, MYI, HICL

#411504

Postby mc2fool » May 12th, 2021, 10:50 pm

monabri wrote:HICL : Wouldn't the attractiveness (i.e. share price) be reduced if interest rates were to increase?

If only it were that simple! Section 3.4 Valuation of the Portfolio, pages 55-67 of their Annual Report, explains the factors that affect the NAV. Happy reading! :D

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Re: HL IT Recommendation for Income CTY, MYI, HICL

#411542

Postby TUK020 » May 13th, 2021, 8:33 am

hassettp wrote:Hi
Hargreaves Lansdown recently recommended the following Investment Trust fro income:

City of Lonndon IT CTY 4.92%
Murray International Trust MYI 4.49%
HICL Infrastructure HICL 4.85%

The yield is tempting. I would appreciate people's views on these ITs. I'm looking for income and am not too bothered about growth.

Peter

I have a bundle of income ITs which include all of the above CTY, MYI, HICL, plus HFEL, MRCH, LWDB as core holdings. I have much smaller stakes in MCT and JETI, which I am wondering about whether to build into this portfolio for additional geographic diversification. I also have a smaller stake in Temple Bar, which is on the naughty step, while I decide what to do with it (probably no action).
The core holdings are all providing regular income, and have a track record of doing so for years.

The income ITs seem to have rolled through the recent pandemic dividend drought and keep paying out by drawing on reserves (yes this is just an accounting artifice) and they are unlikely to do anything more than a nominal increase in dividend for years as they rebuild.
This experience has made me feel that they actually perform a quasi bond substitute in a bond/equity portfolio, while yielding much more than bonds. They will still be riskier than gilts, but the pandemic feels like a reasonable stress test, and they don't seem to offer the guaranteed loss that gilts seem to offer.

Wondering how they will cope with a bout of inflation.

I have smaller stakes in a variety of other ITs oriented towards capital growth, and a larger portion of my portfolio in individual stocks.
Overall, I am looking to gradually migrate my portfolio towards income ITs within my SIPP, together with an increased cash buffer, to simplify my drawdown plans - I start taking pension income next tax year.
Currently income ITs account for approx 25% of my combined SIPP/ISA portfolio, and I expect this to grow towards 50% over a 3-5 year period by periodic top slicing/top up activity.
This simplification I refer to as 'my long term gaga plan'.

Dod101
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Re: HL IT Recommendation for Income CTY, MYI, HICL

#411555

Postby Dod101 » May 13th, 2021, 9:11 am

To answer TUK's comment, when ITs draw on their reserves, it is rather more than an accounting artifice. It is, rather than simply paying a dividend from current revenue, supplementing that revenue by returning some capital as well. In the long run that will affect their ability to generate revenue or at least slow down its growth. That may not matter because mostly things recover before there is any noticeable effect, but I would not call it an accounting artifice.

Dod

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Re: HL IT Recommendation for Income CTY, MYI, HICL

#411561

Postby 88V8 » May 13th, 2021, 9:30 am

Dod101 wrote:To answer TUK's comment, when ITs draw on their reserves, it is rather more than an accounting artifice...

I think what was meant is that the reserves are notional, rather than an actual stache of gold in a pot.
If Smaug were to run an IT, it would be different of course.

V8

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Re: HL IT Recommendation for Income CTY, MYI, HICL

#411567

Postby Wuffle » May 13th, 2021, 9:49 am

I am a simple creature.
The contents of these ITs', will you (or someone) need the products ongoing.
Granted, the first entries for CTY are fags and booze which you might not but largely yes.
Inflation will carry these things along with it. Interest rate changes will reduce multiples and possibly your principle.
But how have you got the principle in the first place, possibly through multiple expansion?
The people following after you, if they aren't getting the multiple expansion, should they get a better return?
Try not to be the person who wants the principle growth, the high dividend return and the limited downside.
I have HICL and MYI.

W.

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Re: HL IT Recommendation for Income CTY, MYI, HICL

#411625

Postby TUK020 » May 13th, 2021, 12:07 pm

88V8 wrote:
Dod101 wrote:To answer TUK's comment, when ITs draw on their reserves, it is rather more than an accounting artifice...

I think what was meant is that the reserves are notional, rather than an actual stache of gold in a pot.
If Smaug were to run an IT, it would be different of course.

V8

that is the case


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