The Lemon Fool

I have been running five IT's for a few years now and have been happy (so far) with the way they have been going. They are:-

Dunedin Income Growth Inv Trust
Henderson Far East Income Ltd.
Merchants Trust
Murray International Trust
Schroder Income Growth Fund

Now feel I want to expand into"new" territory and looking for another Income Trust.

European Assets Trust (EAT) has come up in my research and have checked TLF and the way it pays its Divi seems to be "different" to what I am used to. Should this be a worry or am I just reading it wrong. Another that has come out is Middlefield Canadian Income Trust (MCT), has anyone experience or comments on this IT or EAT.

Am not as confident in my research skills on IT's as on high yield UK equties, so be gentle with me....

Raptor.

Raptor wrote:European Assets Trust (EAT) has come up in my research and have checked TLF and the way it pays its Divi seems to be "different" to what I am used to. Should this be a worry or am I just reading it wrong. Another that has come out is Middlefield Canadian Income Trust (MCT), has anyone experience or comments on this IT or EAT.

I've held European Assets for several years. It is significantly different from the typical income IT in that every January it resets its annual dividend for the current year to 6% of the 31st December NAV (it can pay dividends from capital because it is a Dutch company).

It specialises in relatively obscure smaller companies (when I first bought the shares I didn't recognise a single name in its top ten holdings which was ideal as I wanted a bit of radical diversification).

It pays 3 dividends a year and at least one of them has Dutch withholding tax deducted. Bear in mind that for your tax return the Dutch withholding tax reduces your UK tax liability.

I think that EAT is ideal for HYPers who are looking for a bit of radical diversification.

SalvorHardin wrote:

Raptor wrote:European Assets Trust (EAT) has come up in my research and have checked TLF and the way it pays its Divi seems to be "different" to what I am used to. Should this be a worry or am I just reading it wrong. Another that has come out is Middlefield Canadian Income Trust (MCT), has anyone experience or comments on this IT or EAT.

I've held European Assets for several years. It is significantly different from the typical income IT in that every January it resets its annual dividend for the current year to 6% of the 31st December NAV (it can pay dividends from capital because it is a Dutch company).

It specialises in relatively obscure smaller companies (when I first bought the shares I didn't recognise a single name in its top ten holdings which was ideal as I wanted a bit of radical diversification).

It pays 3 dividends a year and at least one of them has Dutch withholding tax deducted. Bear in mind that for your tax return the Dutch withholding tax reduces your UK tax liability.

I think that EAT is ideal for HYPers who are looking for a bit of radical diversification.

How does this affect having it in my SIPP for tax purposes?

Raptor.

WRT to EAT you may have missed this previous post which may be of interest

viewtopic.php?f=54&t=8315

BrummieDave wrote:WRT to EAT you may have missed this previous post which may be of interest

viewtopic.php?f=54&t=8315

Did read that post but honestly missed the tax bit, so thanks for that.

Raptor

Raptor wrote:I have been running five IT's for a few years now and have been happy (so far) with the way they have been going. They are:-

Dunedin Income Growth Inv Trust
Henderson Far East Income Ltd.
Merchants Trust
Murray International Trust
Schroder Income Growth Fund


Raptor.

You may be happy with DIG but I certainly would not. It is languishing towards the bottom of its sector with a return of 44% over the past 5 yrs and anaemic dividend growth averaging just 1.5% p.a.

By all means diversify into other ITs and sectors but maybe consider ditching this one imho.

Raptor wrote:How does this affect having it in my SIPP for tax purposes?
Raptor.

No affect whatsoever if inside the wrapper of an ISA or SIPP.

Though to be honest with you Raptor I think EAT is presently somewhat overvalued.
• In total returns the share price has risen 36.6% in last 12-month (in Sterling terms)
• In total returns the NAV has risen by 23.8% in the last 12-month (in Sterling terms)
• However, in Euro terms, the NAV total return has only been 15.6% in the last 12-month
• Was on an 8% discount 12-month ago, now on a slight premium

At this particular juncture in time, you’d do well to consider the added currency risk of 100% exposure to the Euro. Furthermore, EAT does not us gearing nor does it currency hedge.

As for the Canada registered Middlefield Income Trust:
• Very biased towards mostly Canadian energy and REIT stocks with a 20% exposure to the US
• Has experienced a very bumpy ride in the last 5 years
• 5-year share price and NAV total returns weighing in at a disappointing 25% and 44.7% respectively
• Currently on a discount of 10.7% and yield of 5%
• High ongoing charges of 1.26% per annum
• Considered by rating agencies to be of above average volatility and risk, which makes it more or less on par with your Henderson Far East Income holding

Unfortunately, in terms of ITs focused on Europe (ex-UK) income opportunities they are very few and far between. While there’s sufficient Europe (ex-UK) ITs with growth mandates I don’t think this is the kind of IT being considered as suitable on this occasion. This is why EAT has become more in demand with investors seeking income even though its ‘income’ is in fact being paid out of capital.

So Raptor, basically what to do? Delay plans to expand into ‘new’ territory for the time being or use funds to add to existing holdings.

BarrenWuffett wrote:You may be happy with DIG but I certainly would not.

Likewise, I would have gone for the ever dependable City of London (CTY).

Raptor wrote:European Assets Trust (EAT) has come up in my research and have checked TLF and the way it pays its Divi seems to be "different" to what I am used to. Should this be a worry or am I just reading it wrong. Another that has come out is Middlefield Canadian Income Trust (MCT), has anyone experience or comments on this IT or EAT.

Raptor, I hold both EAT and MCT.

I think most things have been said (in posts above) about EAT, noting that it may draw on capital to provide the high dividend yield (which I don't mind).

MCT I have held for a number of years (at least 4) and have "Bed & ISA'd" and topped up several times along the way, thus I can't give you much context to the 23% (growth) performance of my holding. It is certainly amongst my best producers of dividend income. Per Citywire, it's current yield is 5.0% and is at a discount of 13% (H&L say discount 9.9%). It doesn't hedge the currency risk, so the SP can move around a bit due to exchange rates movements, and near ex-dividend dates, (it pays dividends quarterly).

http://citywire.co.uk/money/investment- ... undID=3096

http://www.hl.co.uk/shares/shares-searc ... ty_details

In terms of Europe, there isn't so much choice available if one is seeking income. J P Morgan European Income (JETI) could be a consideration. I have compromised on Henderson European Focus trust (HEFT) more of a Growth & some income trust, (in conjunction with EAT for the smaller company and income exposure).

Europe (general) sector:-

http://citywire.co.uk/money/investment- ... ePeriod=12
.

richfool wrote:

Raptor wrote:European Assets Trust (EAT) has come up in my research and have checked TLF and the way it pays its Divi seems to be "different" to what I am used to. Should this be a worry or am I just reading it wrong. Another that has come out is Middlefield Canadian Income Trust (MCT), has anyone experience or comments on this IT or EAT.

Raptor, I hold both EAT and MCT.

I think most things have been said (in posts above) about EAT, noting that it may draw on capital to provide the high dividend yield (which I don't mind).

MCT I have held for a number of years (at least 4) and have "Bed & ISA'd" and topped up several times along the way, thus I can't give you much context to the 23% (growth) performance of my holding. It is certainly amongst my best producers of dividend income. Per Citywire, it's current yield is 5.0% and is at a discount of 13% (H&L say discount 9.9%). It doesn't hedge the currency risk, so the SP can move around a bit due to exchange rates movements, and near ex-dividend dates, (it pays dividends quarterly).

http://citywire.co.uk/money/investment- ... undID=3096

http://www.hl.co.uk/shares/shares-searc ... ty_details

In terms of Europe, there isn't so much choice available if one is seeking income. J P Morgan European Income (JETI) could be a consideration. I have compromised on Henderson European Focus trust (HEFT) more of a Growth & some income trust, (in conjunction with EAT for the smaller company and income exposure).

Europe (general) sector:-

http://citywire.co.uk/money/investment- ... ePeriod=12
.

Cheers Richfool, I suddenly relaised that when I put my "search" definitions in I chose the "income" option, choosing the growth & income does open up a bit. I look to be going for MCT at the moment. Never know next year may be in a position to diversify again. Have stated my aim on other boards to move towards an IT based income portfolio going forward (age and passing it on are the reasons).

@farrado. I did notice EAT movements recently but could not see why. MCT as you say has not had a smooth ride recently but then again neither has my "portfolio"

@BarrenWuffett. Yes, I meant "overall" I am happy with my IT portfolio. Have not considered changing the contents yet, I suppose it is becauce my intention of making IT's a larger part of my high yield income strategy means I am doing a Doris (LTBH) on my IT's, whilst I have been "actively" managing the HYP part down for many reasons.

@SalvorHardin. Thanks, yes when I looked at both EAT and MCT the names were far from household names.

Raptor.

I hold North American Income Trust (NAIT), which is mostly US focused with a bit of Canadian (about 10%). It yields around 3% and trades at a 7% discount currently. Apart from MCT it's about the only income focused trust I've found for North America.

For Europe I hold EAT and JETI, which have been discussed already.

Bookbinder

Just an update to say purchased a small portion of MCT today. Only time will tell, of course, whether that was the correct IT to go for. Thanks to everyone. Decided against EAT at this time as Premium at the moment. Did look at both JETI and NAIT as well.

Raptor.

Raptor wrote:Just an update to say purchased a small portion of MCT today. Only time will tell, of course, whether that was the correct IT to go for. Thanks to everyone. Decided against EAT at this time as Premium at the moment. Did look at both JETI and NAIT as well.

Raptor.

Sounds good. MCT is about 100p to buy currently. It increased its dividend earlier this year.

NAIT and the US is IMHO too high currently.

Just to keep this updated. During the year have increased MCT to a full holding and yesterday started adding JETI. Will see how that goes. Aim to bring JETI up to a full holding before anymore investigation.

Again, thanks everyone.

Raptor.

I recently dumped my holding of the North American Income Trust, after about five years. The facts spoke for themselves. The S&P 500 had risen by about 100% (total return) in that period. The trust had delivered a return of about 75%. Given that I was (and still am) reinvesting my dividends I was clearly wasting my time holding the trust for its income, and paying way over the odds for the privilege. Its charges came to about 1.2% a year, according to its KIDD document. The Merchants Trust has also been a total dog, which I dumped a year or so ago.

Raptor wrote:Just to keep this updated. During the year have increased MCT to a full holding and yesterday started adding JETI. Will see how that goes. Aim to bring JETI up to a full holding before anymore investigation.

Again, thanks everyone.

Raptor.

Thanks for the update, Raptor. I too topped up my already full holding of MCT earlier this year.

I also added a half size holding of JETI.

NAIT I am "holding" due to its US exposure and dividend. I did take some profit last year.

I also topped up Global Growth & Income trust JPGI (J PMorgan Gtrh & Inc trust) which as well as US, European and UK exposure, holds some growth and technology stocks and targets a dividend yield of c 4.00% by drawing on capital.

richfool wrote:

Raptor wrote:Just to keep this updated. During the year have increased MCT to a full holding and yesterday started adding JETI. Will see how that goes. Aim to bring JETI up to a full holding before anymore investigation.

Again, thanks everyone.

Raptor.

Thanks for the update, Raptor. I too topped up my already full holding of MCT earlier this year.

I also added a half size holding of JETI.

NAIT I am "holding" due to its US exposure and dividend. I did take some profit last year.

I also topped up Global Growth & Income trust JPGI (J PMorgan Gtrh & Inc trust) which as well as US, European and UK exposure, holds some growth and technology stocks and targets a dividend yield of c 4.00% by drawing on capital.

JPGI was one I had looked at previously. Am going to stay with my current portfolio (unless forced to do something ) for the time being. Once I have brought JETI up to or close to Median will then look at what I have got and how it has performed for me. Would like to get exposure to Technology as it is a sector devoid in my overall portfolio.

Raptor.

Raptor wrote:Would like to get exposure to Technology as it is a sector devoid in my overall portfolio.

You may well have already seen it, but there is a thread about gaining exposure to technology here:

viewtopic.php?f=54&t=11968

richfool wrote:

Raptor wrote:Would like to get exposure to Technology as it is a sector devoid in my overall portfolio.

You may well have already seen it, but there is a thread about gaining exposure to technology here:

viewtopic.php?f=54&t=11968

Thanks, been following with interest.

Raptor.

Avantegarde wrote:I recently dumped my holding of the North American Income Trust, after about five years. The facts spoke for themselves. The S&P 500 had risen by about 100% (total return) in that period. The trust had delivered a return of about 75%. Given that I was (and still am) reinvesting my dividends I was clearly wasting my time holding the trust for its income, and paying way over the odds for the privilege. Its charges came to about 1.2% a year, according to its KIDD document.

Sobering to remember that before it changed its mandate, and unusually for an IT, NAIT had been an SP500 tracker. (Albeit it had a discount to NAV, but it usually does now as well.)

Avantegarde wrote:I recently dumped my holding of the North American Income Trust, after about five years. The facts spoke for themselves. The S&P 500 had risen by about 100% (total return) in that period. The trust had delivered a return of about 75%. Given that I was (and still am) reinvesting my dividends I was clearly wasting my time holding the trust for its income, and paying way over the odds for the privilege. Its charges came to about 1.2% a year, according to its KIDD document. The Merchants Trust has also been a total dog, which I dumped a year or so ago.

Avantagarde, I'm a bit puzzled as to why you recently "dumped" your holding of NAIT. Although the current yield has fallen back, that will have been because of its strong growth. As you had been holding it for some 5 years the dividend return on your initial investment (yield on cost) must surely have been very good.

I too hold NAIT, and early this year I did reduce (top-slice) my holding, but that was more from the perspective of taking some profit off the table and concerns that US markets were becoming overheated. The dividend return (yield on cost) was and remains very good.

Did you take the profits in order to reinvest them in a higher yielding IT in a different sector?