Keeping it simple: dividend reinvestment

This article explores how a Dividend Reinvestment Plan (DRIP) can help build your shareholding and support long-term investment growth.

Aiming for a success of stock market investing is often less about identifying tomorrow’s big winners, and more about getting the basics right. Regular investment in a diversified portfolio is a more realistic long-term strategy than trying to find the next world-beating technology company. Dividend reinvestment is a straightforward option to support the growth of your investments over time. 

How does it work? Many investment trusts pay a dividend, with the average yield across the sector sitting at 3.3% . For many trusts, paying a regular and growing dividend to their shareholders is as important an objective as growing capital. There are a range of trusts with a long history of growing their payouts to shareholders through all types of financial market conditions. 

You have a choice on how you receive that dividend. You can take the cash, or you can reinvest it to buy more shares. This service is available through investment platforms, or through a Dividend Reinvestment Plan (DRIP) usually available through an investment trust’s registrar. If you choose to buy more shares each year, your shareholding gets a little bigger. You then receive dividends paid from that larger shareholding. Reinvested shares effectively earn their own future dividends. This creates a virtuous circle, helping to grow your portfolio steadily over time. 

Over time, this compounding effect may be significant. Take a hypothetical portfolio of 100 shares, with a current value of £1,000. The trust declares a dividend of 4% (equivalent to £40) and the investor chooses to reinvest it in more shares. They now have 104 shares, valued at £1,040. That doesn’t sound particularly impressive, but making the same reinvestment year after year compounds the effect. After a decade, the investor would have around 150 shares. Even if the share price hasn’t moved at all, an investor would still have seen their investment grow to £1,500, and their dividend would be worth £60 a year. 

Add in capital growth and the effect is stronger. While capital growth can’t be guaranteed, Evelyn Partners analysed the performance of the FTSE 100 over the last forty years to 2025. Over that period, it made a capital return of 391%. But with UK dividends reinvested the total return hits a vastly higher 1,926% . While it can feel like a real bonus to have a regular dividend landing in your bank account, the sensible long-term strategy is likely to be a dividend reinvestment plan. 

You can also benefit from pound cost averaging. This is usually discussed in the context of making regular investments in the market, but also applies to dividend reinvestment. If the share price is low, an investor’s dividend payment will buy more shares. If it is high, it will buy fewer, but the investor will have made some capital gains. In this way, it can help smooth out returns over time, providing some insulation against market volatility. 

How to do it

Most investment platforms have a dividend reinvestment option for the investment trusts held on them. Equally, investment trust company share schemes will also offer you the option to reinvest rather than take dividends as cash. Usually, it is just a question of ticking a box, but every platform is different. Once this is done, there are no further decisions to make – every time an investment trust pays a dividend, the platform will automatically buy more of the same investment. If you don’t do it, your dividends will simply be paid into the cash account on the platform, or directly to your bank account if that is what you have requested. 

There are a number of factors to consider when reinvesting dividends. The first is tax. Dividends are taxable whether you take them as cash or reinvest them in more shares. Investors’ first priority should be to use tax-sheltered investment options such as an ISA or SIPP, particularly for higher rate taxpayers. Within both wrappers, dividends are tax free, so you get to keep the full amount, and the effects of compounding are greater. Reinvested dividends still make sense outside a tax wrapper, but you will need to account for additional tax on your annual return. 

Another consideration is cost. Platforms will often make a charge to reinvest dividends, as they would with a normal share transaction. Some platforms give a much-reduced price for reinvesting dividends – less than £1 in some cases. With others, you may be paying standard share dealing costs. This can eat into the compounding effects of dividend reinvestment.  If reinvestment is a priority, it may be worth choosing a platform that makes the process simple and cost-effective. The Association of Investment Companies (AIC) provides a useful comparison of automatic dividend reinvestment fees charged by many of the UK’s most popular investment platforms, available here. 

Dividend reinvestment is a straightforward option to build a potential larger holding in an individual investment trust. Over time, reinvesting dividends has proved a powerful way to improve the compounding effect of stock market investment. For those who don’t need the income from their investments for day-to-day spending, it is an option worth considering.

Important information

Risk factors you should consider prior to investing:

• The value of investments and the income from them can fall and investors may get back less than the amount invested.

• Past performance is not a guide to future results.

• Tax treatment depends on the individual circumstances of each investor and be subject to change in the future.

• If you require advice please speak to a qualified financial adviser.

This Year (and Got Cheaper at the Same Time)

Michael Foster, Investment Strategist
Updated: October 8, 2026

Joblessness rose last month. And stocks jumped on the news.

It’s weird. And it’s giving us a rare chance to pick up a well-funded 6.8% dividend for 12.3% off its “regular” price.

This deal exists because the fund behind that healthy payout—a tech-focused closed-end fund (CEF) called the BlackRock Technology and Private Equity Term Trust (BTX)—is smack in the middle of a very profitable setup.

That is, both its price on the stock market (in purple below) and the value of its underlying portfolio (its net asset value, or NAV, in orange) are soaring this year:

BTX Skyrockets in 2026 …

The fact that both the portfolio and market price can move independently of each other is a unique feature of CEFs. It’s one we contrarians can (and do!) take advantage of.

Especially in the case of BTX, whose NAV has been doing something interesting lately: rising faster than its price. That’s pushed the fund’s discount to NAV out. It’s now 12.3%.

In other words, we can buy this star performer for 88 cents on the dollar.

That’s right: A fund whose price has popped 41% in a little over nine months is actually cheaper than it was just over a month ago.

… And Goes on Sale at the Same Time

Try finding a deal like that in “regular” stocks! It can’t be done.

BTX’s performance is the kind of bounce-back we expected in February, when we bought the fund at my CEF Insider service after it fell victim to the “SaaS selloff.”

Remember that? It seems like years ago, but it was when investors panicked over fears AI would cripple software stocks as everyone learned to “vibe code.” We saw this fear as overdone, so we bought. Since then, BTX has returned 47% (including reinvested dividends).

We’re going to talk more about this fund’s holdings and strategy in a sec, but there’s something else we need to discuss first. It’s the reason why we’re being particularly aggressive in targeting undervalued income plays like BTX now.

Jobs Report Another Reminder We’re in “Upside-Down World”

To get at that, I want to bring your attention to the latest jobs numbers, released last Friday. They showed that only about 29,000 positions were created in September, well below the 90,000 economists expected.

Right after the report came out, something strange happened: Stocks rose on the news.

On the surface, it makes zero sense. If job numbers disappoint, the economy is by extension weak—and stocks should sell off.

But the details matter here. What we’re going to get into next points to why stocks rose, why I see them as likely to keep rising—and why underpriced equity CEFs like BTX really are in the driver’s seat here.

Let’s start with the overall jobs picture.

As mentioned, the US economy added 29,000 jobs in September, fewer than expected. That slippage feels like a long-term trend. The chart above shows that the number of jobs being added to the economy has been sliding for three years.

But this isn’t the bad news story it looks like. Because there are two longer-term shifts that explain it, and both point to a “balanced” labor market that’s great for the economy.

The first is a sign that Americans are growing richer: More of them are retiring earlier. As a result, the labor force participation rate for the 55+ set has fallen.

So with fewer older people working or trying to find work, the total number of jobs the economy will add at any given time should decline, as well. This, in turn, lowers the “breakeven” point needed to keep unemployment low and steady.

Then there’s the immigration story.

If we look at immigration purely from an economic standpoint, the facts are clear: Fewer people are coming to America to work. That will mean fewer job seekers, and thus fewer jobs added to the economy. Again, this lowers that breakeven mark needed to maintain a healthy unemployment rate.

Economists have known about this for a while. It’s why expectations of job growth have fallen. And while last month’s numbers were below expectations (and we’ve seen some revisions downward in recent months), these differences aren’t enough to cause alarm.

Why This Is Good for Stocks (and Our CEFs)

In fact, those downward revisions are a reason for stocks to rise.

That’s because the job market is in a sweet spot: not so hot that it pushes the Fed to raise rates further, but not so cool that income growth stalls. (And as if to prove the point, odds of an October rate hike fell after the jobs report was released.)

Research from Bank of America shows that lower-income groups saw 4.7% year-over-year after-tax wage growth in August. That’s higher than that month’s 3.4% inflation rate. While inflation is still too high, the result of higher-than-inflation wage growth is likely to be continued gains in corporate sales and profits.

Back to BTX

Like I said, the stock market saw a lot of this coming and reacted. Beyond last Friday’s bounce post-jobs report, we’ve seen S&P 500 index funds rise about 14% on the year, while those for the tech-focused NASDAQ 100 are now up around 20%.

Note, however, that while those gains are hitting index funds, CEFs investing in US stocks have dipped slightly and trail the two major indices on the year, with a 9.35% total return as of this writing.

This is a strange situation that’s caused discounts among CEFs to expand to very wide levels, now 8.9% on average.

BTX, of course, is even more of a bargain, with that 12.3% markdown. That’s way too cheap for a fund that holds names like Micron Technology (MU), Lumentum Holdings (LITE) and NVIDIA (NVDA), all high-flyers fueling the AI revolution.

Moreover, BTX gives us some exposure to pre-IPO tech firms, as well—including Anthropic. That makes it a good “one-stop shop” for your portfolio’s tech bucket, especially since we individual investors can’t buy pre-IPO companies ourselves.

Then there’s the 6.8% dividend, which is well below the fund’s total NAV return this year. And when you calculate it based on NAV—not the discounted market price—the figure gets lower still: around 6%.

That leaves us with the trifecta we love to see in CEFs: strong performance, a wide discount, and a dividend well supported by NAV returns.

BTX is also the poster child for something else we’ve discussed many times in these columns: the slowness of CEF investors to respond to market changes, compared to those who buy regular stocks.

But the thing to bear in mind is that these investors typically do catch on eventually—especially when there’s a steady 6%+ dividend on the table. Getting in now lets us take advantage of that lag and kickstart BTX’s 6.8% dividend, too.

Treasuries? Forget ’Em. These 4 AI Funds Pay 10% (and They’re Cheap) 

BTX isn’t the only AI-focused CEF investors have been slow to notice.

I’ve found 4 more. They yield 10% on average, and they trade at discounts that have been blown way out of proportion, too.

A setup like that sure beats Treasuries.

Our latest question asks whether there’s a price to pay for the convenience of a monthly flow of income.

by Kyle Caldwell from interactive investor

Name withheld asks: I’m weighing up my options ahead of retirement. My portfolio consists of growth-focused funds and shares, but I’m considering a change in approach and giving the portfolio more of an income focus. I like the idea of trying to withdraw only the income generated from the investments each month, but I’m not sure how feasible this is. I’m planning to hold both income funds and some FTSE 100 dividend-paying shares. For funds, should I just focus on those that pay a monthly income to make life easier?

Investors looking for regular income have far more choice nowadays. More than 100 funds now pay monthly distributions, compared with only a few dozen 15 years ago.

• Invest with ii: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

The approach is convenient as such funds automatically generate a stream of cash that will be paid out each month. However, I would urge investors to view the regularity of the income payments as a “nice to have” rather than a must-have.

Instead, prioritise whether the way in which the fund invests (its asset allocation) meets your risk profile and objectives. In addition, size up the fund’s track record and consider the expertise of the management team, including how long they’ve been running money. If a fund falls short on these measures, its monthly payout schedule alone shouldn’t be enough to earn it a place in your portfolio.

For me, it doesn’t make sense to rule out funds or investment trusts that pay quarterly, or even half yearly. With a little planning, investors can create a monthly income stream by combining funds and trusts that make distributions at different points throughout the year.

In addition, going solely down the income fund route can increase risk and reduce diversification as fund managers are restricted to owning a range of stocks or bonds to deliver on their objectives.

One way to create a more diversified retirement portfolio is to take a total return approach. Instead of relying only on dividends and interest for income, withdrawals can be funded from the portfolio’s overall returns.

For example, an investor aiming for £1,000 a month doesn’t need all the investments to pay £1,000 a month in income. A portfolio generating £700 in dividends and interest could be topped up through regular capital withdrawals, potentially giving you access to a broader range of investments.

Another thing to bear in mind is the shortage of options for investors on the lookout for monthly income funds that focus solely on equities. Most monthly income funds invest in bonds or adopt a multi-asset approach (shares and bonds).

For bond funds that pay a monthly income, there’s a tendency to focus on high-yield bonds, which carry greater risks than high-quality bonds, such as UK gilts.

That being said, multi-asset funds throwing off regular income are potential core holdings for retirement portfolios. Below are some of the options, although as mentioned, it is important to judge the fund on its merits.

For investors set on receiving monthly distributions, the following funds may be worth further research.

Those that pay out monthly and hold between 20% and 60% in shares include abrdn Diversified Growth and Inc I Inc (B1C4288) (yield of 4.4%); Artemis Monthly Distribution I Inc (B6TK3R0) (yield of 3.7%); Invesco Distribution UK Z Inc (B8N4543) (yield of 4.4%); Premier Miton Cau Mthly Inc B Inc units (B79QBF9) (yield of 4.9%); and Schroder Monthly Income Z Inc (B66FVB8) (5.6%).

Funds that invest solely in UK shares and pay a monthly income include AXA Framlington UK Equity Income Z Inc (B8HHY29) (yield of 3.9%); Fidelity Enhanced Income W Inc (B87HPZ9) (yield of 6.9%); and Man Income Professional Inc D (B0117D3) (yield of 4.1%).

Yield figures, provided by Morningstar, reflect the 12-month average.

How do monthly income funds work?

The fund manager invests in shares, bonds, or a mix of the two. The amount of income generated is based on the dividends the underlying holdings have paid each month.

Therefore, as with any fund, the income can vary, but to counteract this most of the funds smooth the dividend payments into 11 equal amounts, followed by a final payment of everything that’s left over.

Investors need to select the “income (inc)” share class to receive the cash each month into their account. A fund’s factsheet will contain the income payment dates and the past dividends per share. 

Investment trusts vs funds for regular income

As seasoned investors can testify, the investment trust structure can work very well for investors looking for a regular income stream.

This is because one of the advantages of investment trusts is their ability to squirrel away income for a rainy day. Up to 15% of income generated each year from underlying investments can be saved, in what is called revenue reserves.

When there’s a period where the income from underlying investments dries up, for example during the Covid-19 pandemic and the financial crisis, investment trust boards can utilise those reserves and top up shortfalls. 

This is why there are an impressive number of investment trusts that have raised their dividends year in, year out, for long periods, with 20 increasing their dividends for more than 20 years. 

In contrast, open-ended funds don’t have the same option when there’s a lean income period. Funds are required to return all the income generated to investors. Therefore, if the underlying investments held by the fund are making less money, less income will be paid to investors.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. 

New to income investing, one customer wonders what he wants.

by Dave Baxter from interactive investor

Mike asks:I have been investing for growth for many years and am finally approaching a point where I can consider retiring.  

I have a sizeable amount invested in pensions and an ISA but am new to the idea of income investing. What level of yield should I be targeting? 

Investment income can be a great way to fund a comfortable retirement. 

But assessing the yields on offer can be a tricky game, whether you are looking at individual shares, equity income funds or other asset classes such as bonds. 

• Invest with ii: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

As is often the case in this series, your individual circumstances and preferences will provide a better answer than any broad rule of thumb. 

Firstly, anyone approaching retirement should ask how much money they will expect to need over the coming decades, and ideally carry out cash flow planning. 

This exercise involves you mapping out your future income versus your expected outgoings over the course of retirement. 

While not an exact science, it can give a sense of how much money you might need from a portfolio. 

Cash requirements can often be higher in the earlier years of retirement before falling, and then potentially rising back up later in life because of factors such as potential care costs. 

This is an area where individuals can often benefit from consulting a financial adviser. 

Once you know how much you need, you can see how much money your portfolio might need to generate as a percentage. 

To go with some very easy maths, an individual lucky enough to have a £1 million investment portfolio could get £40,000 a year by generating a 4% yield. 

However a few other considerations are worth weighing up. 

You might also want your portfolio to generate some growth, so as to keep up with inflation. 

The same thinking applies to dividend growth, given that you ideally want your income to keep up with rising costs. 

A starting point

That immediately brings us to a handful of potential options. 

The recent sell-off in bonds means that yields again look interesting, with a UK 10-year government bond currently yielding north of 5%.  

That would be a “safe” investment for those who simply hold it to maturity and keep collecting the interest payments, though said payments would not increase over time. 

Similarly cash-like funds such as Royal London Short Term Money Mkt Y Inc (B3P2RZ5) can see the returns they generate rise in line with interest rates, giving you some level of income while avoiding substantial investment risks. 

Those who do want to see increases in their pay out will often turn to the equity market, and UK large-cap shares do command a following thanks to their dividend records. 

In the fund space many investment trusts have lengthy records of dividend increases, with the so-called “dividend heroes” including City of London Ord

CTY

 Bankers Ord

BNKR

 Alliance Witan Ord ALW Caledonia Investments Ord CLDN The Global Smaller Companies Trust Ord GSCT F&C Investment Trust Ord FCIT and Brunner Ord BUT. 

However not all so-called heroes have such high yields, with names like Scottish Mortgage Ord

SMT

 (on a 0.3% yield) on the list.

It’s therefore worth asking if the yield seems sufficient in the first place. 

Judging yield itself

The UK market is awash with juicy dividend yields, even after recent price gains have pushed some of these down.  

An individual picking investments based on yield alone might be tempted by names like Ithaca Energy Ordinary Share ITH

on around 9%, Legal & General Group LGEN

0.90% on 7.4% or Imperial Brands IMB5.06% on 6.6%.  

The investment trust sector, which has been under quite some pressure in recent years, can go even further on this front. 

NextEnergy Solar Ord

NESF

 yields 16.5%, for one. 

But here comes the health warning: yields, which move inversely prices, can point to trouble if they are especially high. 

One very broad rule of thumb is that any yield of 7% or more should invite questions. 

Ask, for example, whether the dividend seems sustainable. Is the company or trust facing trouble, and is the dividend actually sustainable?  

NextEnergy Solar, for one, actually slashed its dividend pay out earlier this year and is looking to prioritise a reduction of portfolio debt after multiple challenging years. 

It can therefore make sense to scour a high-yielding company’s results and disclosures to see see if it faces problems, and to check metrics like dividend cover. 

Generally a dividend cover ratio of 2 or higher is consider a reassuring level. 

As ever, diversification can be your friend here. 

An investor with income requirements would do well to diversify, by equity region but also by asset class and by yield level. 

Similarly, it could make sense to hold some growth funds alongside those names more focused on yield. 

While some investors are happy with this, it can also make sense to ask whether you are sacrificing better total returns for a chunky dividend payout. 

That’s a conundrum we have often discussed when it comes to the popular investment trust Henderson Far East Income Ord HFEL

The trust’s yield tends to sit at, or just below, the 10% level. 

But it has lagged the competition by total returns in recent years, meaning shareholders are certainly sacrificing greater gains elsewhere, for now. 

Bonds might feel niche, but the sell-off can have wider effects.

6th October 2026

by Dave Baxter from interactive investor

Life has grown “interesting” for bond investors yet again.

Government bonds, the debt instruments that act like IOUs for nations borrowing money, have been tumbling in value this year.

Prices have fallen especially hard in recent weeks and yields (which move inversely to prices) have surged.

To quantify this, note that the yields on some government bonds have hit multi-decade highs in recent weeks. 

The yield on a 10-year UK government stands at around 5.4%, slightly above that of its US equivalent. 

Even a 10-year bond from the German government, often viewed as especially safe, has moved on to a 3.6% yield, much higher than a year earlier.

To put this in context, in early October the yield on the 10-year US Treasury hits its highest level since 2002. The German 10-year yield reached a level not seen since 2009.

What’s happening?

Investors tend to reach for a simple narrative when explaining any sell-off, and in this case one factor cited is a rise in energy prices, the possibility of inflation surging, and the interest rate rises that could accompany it.

Certain idiosyncratic developments are also having an effect in places: French government bonds have sold off ahead of elections there, for example. 

There are also some jitters about the artificial intelligence (AI) “hyperscalers” turning to the bond markets for funding.

Rate rises are often regarded as the enemy of government (and higher-quality corporate) bonds, because the increased cost of money erodes the value of the fixed-interest payments such bonds deliver.

And bonds are still nursing wounds from 2022, a year that was marked by rate rises and a big sell-off for the asset class.

The average UK gilt fund is down by around 20% over a five-year period, although some of this pain can also be attributed to the disastrous “Mini-Budget” unveiled by Prime Minister Liz Truss in the autumn of 2022.

What it means for you as an investor

This has a few effects for investors.

It could mean another rough period for bond funds, as well as for individual bonds. 

Although with the latter, volatility is irrelevant if an investor decides to hold to maturity.

Here, they can lock in the return promised by yield, by receiving interest payments over the period and then a repayment of their capital.

DIY investors have certainly made the most of higher bond yields in recent years, as well as the fact that they don’t have to pay capital gains tax on such holdings outside of a tax wrapper. 

Investors have often backed bonds with shorter maturities and made good gains.

Our own data suggests that investors turned to the same tactic in September. 

If we look at “real-time” buys from ii customers (and exclude regular investing), they heavily favoured the UNITED KINGDOM 0.125 31/01/2028

TN28

 UK government bond in September, with customers also snapping up UNITED KINGDOM 0.5 31/01/2029

TG29

 and UNITED KINGDOM 0.25 31/07/2031 TG31

Some did take advantage of the yields offered by longer-maturity bonds, which are more vulnerable to rate changes, with the UNITED KINGDOM 5.375 31/01/2056

T56

 also proving fairly popular.

Bonds do remain a niche area, and something of an unknown, for many investors. 

But the sell-off does have important implications for many other areas of your portfolio.

Beyond bonds

Performance figures from 2022 might offer a sense of how a prolonged bond sell-off would affect other corners of the investment universe.

The pain for bond funds themselves was apparent enough in that period. 

The average UK index-linked gilt fund, which is particularly sensitive to rate rises because of the long maturity of the bonds it tends to hold, lost 35.3% in that year alone.

The average gilt fund fell by around 24%, with the average fund from the Investment Association’s (IA) Sterling Corporate Bond sector, exposed to higher-quality corporate bonds, losing around 16%.

2022 also made it painfully obvious that infrastructure and property assets are highly correlated to government bonds. 

The yield from a gilt is seen as the base, “risk-free” level available, and when that rises so do yields from riskier assets such as infrastructure. 

The fact that both infrastructure and property investors take on lots of debt means a higher cost of debt can eat into returns, with this also proving painful for private equity funds.

It’s therefore worth keeping a close eye on those infrastructure funds popular with ii customers, from Greencoat UK Wind

UKW

 to Renewables Infrastructure Grp

TRIG

Property funds that have proved popular, such as Schroder Real Estate Invest Ord

SREI

 and Tritax Big Box Ord

BBOX

could also feel the pain.

Investors will want to keep an eye on a few things. 

There are the so-called discount rates, or the value such funds attribute to their future cash flows. 

The value of such flows falls as rates rise, meaning discount rates can fall and net asset values (NAV) can also come down, eating into returns.

It can also be harder to sell assets at decent valuations in such an environment, meaning it’s worth watching how well investment trusts in these sectors manage to sell assets. 

Renewable energy infrastructure trusts in particular are on a mission to sell down assets and in turn reduce their already high levels of debt.

On the bright side, we could make the argument that these sectors are better prepared for an era of high rates than they were back in 2022. 

Back then, infrastructure trust shares had tended to trade on big premiums to NAV before rate rises kicked in, leaving valuations a long way to fall.

Meanwhile, keep another eye on those funds that use bonds as a source of ballast. 

The so-called wealth preservation trusts, Ruffer Investment Company

RICA

Capital Gearing Ord

CGT

 and Personal Assets Ord PNL0.19%, make use of bonds to varied extents, and differ by their exposure to bonds of different maturities.

A popular multi-asset franchise would also feel the brunt of the bond sell-off. 

The more bond-heavy names from Vanguard’s LifeStrategy franchise could feel the pain – and actually performed worse than their equity-heavy counterparts in 2022.

There’s a chance that a bond sell-off could eventually feed into an equity sell-off, too. 

That could hurt highly valued shares such as those in the AI space, and growth shares are more generally pretty vulnerable to higher rates. 

But there is an argument, again, that some classic growth companies have grown more resilient since 2022, with stronger balance sheets.

Bargain hunters may well want to establish a watch list and buy in if we see big falls, provided they can be patient and stomach some volatility. 

Punchy growth funds such as Scottish Mortgage Ord

SMT

 suffered horrific losses in 2022 but mounted a stronger recovery in later years.

If 2022 is a reliable guide, there may not be many places to hide from a broad sell-off. 

But it’s worth noting that commodities and value funds did have a better year.

All-world trackers were the most popular index funds and ETFs in September

The list of the most popular index funds and ETFs includes four all-world funds, with those investing in all-caps and mid-and-large caps both included.

Meanwhile, gold and silver funds hold positions in the top 10 despite the precious metals both losing value in September.

#	Index Fund or ETF
1	Vanguard FTSE Global All-Cap UCITS ETF USD
2	Vanguard FTSE All-World UCITS ETF
3	iShares Physical Gold ETC
4	Vanguard FTSE Global All Cap Index
5	HSBC FTSE All World Index
6	Vanguard S&P 500 UCITS ETF
7	Vanguard LifeStrategy 80% Equity
8	Vanguard LifeStrategy 100% Equity
9	iShares Physical Silver ETC
10	Vanguard LifeStrategy 60% Equity

Source: Interactive Investor, 7 October

Most bought investment trusts

While neither REIT managed to reach the top five, many of ii’s private investors made real estate plays in September, buying the Schroder Real Estate Investment Trust (LON:SREI) and Tritax Big Box (LON:BBOX).

Caldwell said: “The sector has been under pressure since around 2022, in part owing to interest rate rises. Therefore, investors buying today will be hoping the sector is at a potential turning point.

“As well as the potential income attractions, property provides important diversification benefits for investors keen to manage risk. Property can also serve as a way to play future trends, including the recent boom in AI infrastructure spending.”

#	Investment Trusts
1	Scottish Mortgage
2	Greencoat UK Wind
3	Polar Capital Technology
4	City of London
5	Henderson FE Income
6	Schroder Real Estate Investment Trust
7	F&C Investment Trust
8	The Renewables Infrastructure Group (TRIG)
9	JPMorgan Global Growth & Income
10	Tritax Big Box

Source: Interactive Investor, 7 October

Aside from REITs, the top ten list includes well-known trusts like Scottish Mortgage, which was the most bought in September, and other popular growth and income trusts.

This 14% Dividend Can Be Paid. But Will It ?

Brett Owens, Chief Investment Strategist
Updated: October 7, 2026

A lesson that, won’t you believe it, REIT (real estate investment trust) investors sometimes learn the hard way! Here we chase yield rather than buckets. We must analyze not one but two aspects of a payout:

1. Can a company pay its dividend? (As in, does it generate enough cash to fund it?)
2. Will the company continue to pay its dividend? (Separate from ability—this is the will of the Board of Directors to keep the payout!)

Question one is the easy one. Dividend coverage shows whether the payout is earned via income. But it does not tell us whether the Board values future dividend payments over other goals such as lower payout-ratio targets, future acquisitions, debt paydowns, or other management dreams.

Here’s an example with an open question. Innovative Industrial Properties (IIPR) is a landlord to cannabis growers that we discuss from time to time, always making a joke about what a high yield the stock boasts. On September 15, its board declared yet another $1.90-per-share quarterly dividend, which annualizes to a blazing (sorry, couldn’t help it) 14% yield.

Problem is, the landlord generated only $1.83 per share in AFFO (adjusted funds from operations, the REIT version of cash flow) in the second quarter! By the company’s own supplemental, its payout has run above 100% of AFFO for five straight quarters. It’s possible short-term to supplement a divvie with cash saved up but dicey the longer it goes. Will management keep the payout where it is?

(A reminder for REITs that we look at funds from operations (FFO) or adjusted funds from operations (AFFO), to measure cash flows. REITs must pay out at least 90% of their taxable income to keep their REIT status. But the legal floor says nothing about whether or not a particular dividend is safe!)

Some REITs decide a dividend cut is prudent even when not paying out 100% or more of AFFO. Community Healthcare Trust (CHCT), a little healthcare landlord, recently cut its dividend for less! Since its 2015 IPO, CHCT raised its dividend every single quarter, nudging it from $0.375 to $0.48 per share. What a run! And the payout was covered at 86% of AFFO.

The Board wasn’t having it, though. On August 4, it decided 86% was more than it wanted to pay and cut the divvie by 31%. The new target ratio was “approximately 60%.”

The AFFO was there! But the Board wanted to keep more of it for the business. It could have paid but chose not to.

We saw the same thing at Crown Castle (CCI) last year. In 2024, the cell phone tower REIT generated $6.98 per share in AFFO versus $6.26 in dividend payments. Its payout consumed about 90% of AFFO, so it was covered by that year’s AFFO.

But in March 2025, the Board cut it a whopping 32% from $1.565 to $1.0625 per share quarterly—from a juicy $6.26 to less so $4.25 a year—and, alongside the sale of its fiber business, set a new policy of paying out 75% to 80% of AFFO. Yes, the dividend was covered. The Board simply decided 90% was more than it wanted to pay.

Back to IIPR. Its $0.07 per share “coverage gap” between AFFO earned and dividends paid costs the company $2 million per quarter out of savings. But earnings just took a hit this summer when a big tenant shut down operations at two Florida properties, jeopardizing 5.2% of IIPR’s annualized rent and loan income.

Meanwhile, management is writing other checks! Last week, the company committed another $245 million to its loan to life-science developer IQHQ, bringing the total commitment to $400 million.

Can IIPR afford fattening its IQHQ loan and its dividend? Technically, yes—the company had $204.7 million in cash on June 30 and net debt of just 14% of gross assets. But will management keep using its balance sheet as a bridge loan?

Last earnings call, management didn’t mention the dividend, whose next declaration is due in mid-December.

It could work out and the dividend may be fine. But it’s like Seasonal, my player who hasn’t touched a ball since February. Maybe he walks into the gym and makes his first five shots. But if the will isn’t there, it’s tough to bank on the results.

If you’re buying high yield stocks without researching whether management has the ability and the will to fund its next payout, you’re gambling with your retirement funds!

Brett Owens, Chief Investment Strategist
Updated: October 6, 2026

It’s an app only Silicon Valley could come up with.

One of its key selling points? It can help users root out the monthly subscriptions they signed up for and forgot about—and cancel them.

I’m talking about Muse, the AI agent Meta Platforms (META) launched last month. While Muse offers a free version (with a usage limit), it also offers—get this—a paid monthly plan.

Which raises the question: If you don’t use it enough, will Muse suggest canceling itself?

Not likely.

But that didn’t stop the (reliably) skittish mainstream crowd from doing what they always seem to when the threat of AI disruption rears its head: sell.

They did it when AI was apparently coming for software stocks.

And they did it when a Substack post from Citrini Research imagined 10% unemployment due to AI.

Here we are again. This time with Muse.

Investors Are Wrong (Twice!) About This Undervalued Insurance Stock

The target this time? Insurance stocks. And one of our favorites in the space—Aflac (AFL)—was caught in the crossfire. It’s down about 3% since Muse hit No. 1 on the AppStore on September 22.

This was, in fact, the second hit the insurer has taken in as many months (the other came from investors’ misread of the company’s second-quarter earnings report).

Neither makes sense, and they’ve opened up a chance for us to grab the stock for around 14% below its 2026 peak.

Let’s work through those two points, starting with that earnings report. Then we’ll get into the AI case the bears missed: Far from being a threat to the company, AI is a trigger I see unleashing faster earnings (and dividend!) growth for Aflac.

Weak Yen Distorts the Profit Picture

The company’s second-quarter earnings, reported in early August, stated that adjusted earnings per share fell 1.7%. That looked bad. But Japan is Aflac’s biggest market (at a bit over half of the company’s revenue), and a weak yen muddled that number.

No matter to the investing herd, who read the headline number and sold. But the constant-currency line—the one we contrarians know to read—showed growth:

The bottom line looked even better, with net earnings vaulting 38%, from $599 million to $825 million. And net earnings per share jumped even more—47%—because Aflac bought back $983 million in shares last quarter.

That’s 1.7% of the company, locked away for good. (Hold that thought, because it points to a “hidden yield” of 8.9% that most investors miss.)

Back to Muse for a second.

The app essentially takes AI from a chatbot to a personal assistant, with the ability to arrange your life for you: book trips, cancel subscriptions, make purchases and, yes, bargain-hunt insurance policies.

That’s weighed on insurance stocks, due to fear it will make it harder for them to hang on to customers. But this is an overreaction, especially when it comes to Aflac.

For one, the bulk of the company’s business comes in the form of health and life insurance offered through employers and paid through paycheck deductions. An AI assistant can’t do much with those.

That’s a simple-to-find fact the crowd has raced right past, and it actually makes the business less vulnerable to AI disruption, not more.

No matter, the herd sold anyway.

What’s being missed in the fuss over Muse is that Aflac is set up to be a long-term AI winner. The company is using AI for things like sorting documents and pre-processing claims—that is, making sure a policy is current and paid up before a claim is processed.

And, for simpler claims—we’re talking stuff like dental visits and eye exams—the company is using AI from top to bottom. As I write this, Aflac has automated about 54% of these claims, and about 85% of its overall claims now come through its mobile app.

That means fewer people need to answer calls and push paper. Which is obviously not great news if you want to work for Aflac. But it is great for us, because it should mean greater cash flow for Aflac, and bigger dividends and share buybacks.

The company is a generous giver of both: Even though the stock yields just 2.2% today, it’s nearly tripled the payout—up 183.7% in the past decade. That means anyone who bought back then is earning a lot more on their initial buy: a sweet 6.9%!

And history tells us this payout is reliable, having been hiked for 43 straight years.

Aflac has also bought back and retired 38.5% of the outstanding shares it had 10 years ago (or more than a third of the company!). Which brings me to that “hidden” yield I brought up a second ago.

It’s called shareholder yield and it’s a measure that looks to include every way a company can reward us, including dividends and buybacks. Buybacks get a bad rap, but they shouldn’t, because they juice returns in the long run, as they make all of a company’s per-share metrics (most importantly earnings per share) grow faster.

That’s helped boost Aflac’s share price, which is up a solid 210% in the last decade.

Aflac Stock Gets a “Buyback Boost”

In addition, those buybacks fuel dividend growth, as they leave Aflac with fewer shares on which to pay dividends. It’s no coincidence that Aflac’s dividend growth (in purple below) has taken off as its share count (in orange) has dropped:

Fewer Shares Mean Faster Payout Growth

That tees up shareholder yield: It’s the number we contrarian income investors really want to know—and nobody talks about it!

To calculate it, take the amount spent on buybacks and dividends in the last 12 months, deduct share issuances, then divide that by the company’s market cap. Aflac makes this easy for us: In its second-quarter earnings presentation, it broke this all down nicely:

Source: Aflac second-quarter 2026 earnings presentation

In the last four quarters, Aflac spent about $5 billion on dividends and buybacks, with a lean toward buybacks. (Which is okay by us, given the stock is 14% off its 2026 high.)

With a $56-billion market cap (or the value of all outstanding shares), we can say that Aflac has an 8.9% shareholder yield—a bit more than four times the current dividend yield of 2.2%.

Let me close with another fast mention of AI, because the tech ties back in here: As AI cuts Aflac’s costs and helps it tap new growth areas, I expect the company’s shareholder-friendly management team to share more of that wealth with us—and boost the firm’s shareholder yield as they do. We’re here for it!

5 Soaring Dividends the AI Panic Has Left for Dead

My Dividend Magnet strategy naturally sets us up to profit from “AI disruptions” like this because it rests on one simple principle:

A stock’s share price tracks its dividend higher over time. 

That makes our strategy clear: Buy a company with a consistently growing payout—especially when it’s out of favor. Then hold and “ride along” as that soaring payout pulls the stock higher, setting us u for price gains alongside our growing dividend.

You can see it in action with Aflac, whose dividend has acted like a “floor” under past pullbacks:

Aflac’s Dividend Growth: The Cure for AI Disruption