Investment Trust Dividends
The TR chart for MRCH. After the covid crash there was plenty of time to buy into the price drop, always easier with hindsight.
If you bought at 400p, the current dividend is 30p, so a buying yield of 7.5% plus the yield from the dividends re-invested. April of last year another opportunity to buy. Maybe better to wait for a market crash before opening a new position but one for your watch list.
By Lotte Edwards
Merchants (MRCH) made a flurry of purchases over the first half of the year, taking advantage of what lead manager Simon Gergel described as an increasingly ‘polarised’ UK market.
The £992m UK Equity Income trust run by Allianz established positions in eight new companies during the six months to the end of July.
In June alone, it deployed nearly 5% of the portfolio across three software and information services names: Auto Trader, Sage, and Wolters Kluwer. All three were caught up in an indiscriminate sell-off beginning in February over fears of disruption from artificial intelligence (AI).
‘For the first time in many years, these companies were trading on modest valuations and with dividend yields close to the market average or higher,’ Gergel said. ‘Whilst we acknowledge that AI does create some new potential risks, it also creates opportunities to sell incremental services.
‘By diversifying exposure across three stocks, we were taking advantage of what we believed was a mis-pricing of this area, without taking undue risk on any one company,’ he said.
Elsewhere, new positions were taken within the healthcare, travel & leisure, media, construction & materials, and life insurance sectors.
Helping to fund the buying spree, five positions were exited entirely, including consumer goods giant Unilever following the announced sale of its food business to US seasonings manufacturer McCormick.
‘Whilst we understand the logic of the deal, it will take a long time to complete and we decided to sell the shares to reinvest in a bigger position in Reckitt, which we believed offered better value,’ Gergel explained.
Over the reporting period, Merchants delivered a net asset value (NAV) total return of 9.3% and share price total return of 8.4%, outperforming the FTSE All-Share benchmark’s 7.9% gain. Over a five-year horizon, it remains ahead of its peers, with shares up 65.2% versus 59.7% for the average UK Equity Income trust.
Performance was aided by takeover bids at substantial premiums for two of the portfolio’s larger holdings, Tate & Lyle and DCC, providing external reassurance of the value hiding in overlooked UK stocks . They gained 50% and 40% respectively.
Despite a considerable rally for the FTSE All-Share over the past 12 months, the managers stressed that UK medium-sized companies − to which MRCH is tilted − look ‘particularly cheap’.
The board declared a first-half dividend of 15p per share, up 2.7% on last year and marking 44 consecutive years of increases. The period represents the final half-year report for chair Colin Clark, who will step down at the end of September.
I’ve sold112 shares in HFEL for a ‘profit’ of £300 as the share is at the higher risk in the SNOWBALL, Mr. Market may take back the profit and some.
Current profit for the share £526.00, whilst remembering that a profit is not a profit until the underlying security has been sold and the cash sits in your account.
Investors Alley <info@investorsalley.com>
| A stock can climb for months without paying you a dime.That’s the problem I want to help you solve.I’ve been researching funds designed to generate income from stocks… even when the companies themselves pay little or nothing in dividends (like Tesla or Apple).I call them “Paycheck ETFs.”Whether your retirement income goal is $3,000 or $5,000 a month, see how you could help fund that goal on less than you think.The fund managers use options to collect payments that can help fund distributions to shareholders.You buy the ETF through your brokerage account. The managers handle the trades.There’s a trade-off: you can miss out on some potential gains…But if your goal is money to spend in retirement, this is an approach worth understanding.Because “How high can my stocks go?” is only half the question.The other half?“How much income could my savings help me collect?” |
Tim Plaehn
 Back Up the Truck On This 7.8% Dividend as Rates Rise by Michael Foster, Investment Strategist This latest shift toward interest rate hikes has sent income investors into a tizzy. That’s great for us, because they’re tossing out one terrific fund kicking out a 7.8% dividend that’s grown. This smartly run corporate-bond fund is now on the table for 11.9% below the value of its portfolio. That not only positions this fund (a closed-end fund, or CEF, to be exact) for future upside-it helps cushion its portfolio, letting us collect its 7.8% payout in peace as the Fed raises rates. I know that may sound strange: Usually higher rates are bad for bonds, especially for funds chock full of bonds that pay out “old” rates that may be lower than the “new” interest rates likely to come. But here we are. Let me explain my thinking here, then we’ll dive into the dynamics fueling this growing 7.8% payout. Strong Economy = Greater Safety for This Discounted Dividend With the latest hike, the Fed raised the upper end of its rate target by a quarter of a point, bringing it to 4%. That, of course, is meant to slow down borrowing in an attempt to keep inflation in check.  But let’s be clear about something here: Inflation, while stubbornly above 2%, hasn’t tracked much higher than 3% since its peak at the start of the Iran conflict. The inflation gains we’ve seen lately have a lot more to do with that situation, and how it’s driven up oil prices, than with runaway inflation due to systemic problems in the economy as a whole. That’s key, because it suggests we’re not in a 2022-style situation, where inflation roared to 9%. Instead, once the conflict ends (and it will at some point), inflation will likely shrink back to somewhere around the Fed’s 2% target. So what we’re really seeing is the effect of higher oil prices on the one hand but also a strong economy on the other, especially due to high AI investments. So the Fed is doing what it should be: Trying to maintain strong economic growth without allowing it to become a bubble. That economic strength is backed up by other numbers, like low corporate-default rates and strong household income gains and spending, with median US household income up 2.6% in 2025, to a record high of $87,460.  These strengths have, of course, propelled stocks in recent years. But they’ve also helped bonds. Indeed, they’re part of the reason why the corporate-bond default rate has stayed low, even after interest rates have gone up. This is a godsend for debt investors: They get higher rates on the bonds they invest in, and they get fewer defaults, despite those higher rates. Which brings me back to that overly discounted 7.8%-paying fund. Higher Rates Could Mean More Hikes for This 7.8%-PayerThe fund in question is the PIMCO Dynamic Income Strategy (PDX), a holding of my CEF Insider service and one of the many PIMCO funds managing corporate bonds. Before we go further, I want to stress how important the PIMCO brand is: The company manages over $2.3 trillion in assets and is one of the world’s most prominent bond investors. That means it gets early access to the best new issues. This is why PDX (and indeed many PIMCO bond funds) has crushed the go-to corporate-bond index fund, the State Street SPDR Bloomberg High Yield Bond ETF (JNK), over the long haul. PDX’s Well-Connected Managers Give It an Edge  In addition, as you can see above, PDX has returned around 116% since its launch in 2019. That’s a big move for a bond fund, and another sign of management’s skill. In addition, the fund has not only maintained that 7.8% dividend-it’s grown it, while offering multiple special dividends along the way. This Dividend Is Much More Than “Just” a 7.8% Yield  Source: Income Calendar First, even though it’s a little tough to see in the chart above, PDX’s regular payouts have risen 33% since its IPO in 2019. That’s impressive enough on its own for a high yielder like this. But also look at those spikes in late 2024 and late 2025: Those are special dividends the fund has paid out, thanks to its excess income due to, you guessed it, higher-yielding corporate bonds issued after the rate hikes of the prior two years. More special payouts are likely, as the rate hikes we’re now experiencing give management more opportunities to buy higher-yielding bonds. Meantime, that 11.9% discount to NAV helps cushion the portfolio by virtue of the fact that it’s so unusual for a PIMCO fund. Due to the company’s sterling reputation, most of its funds trade at a premium. What’s more, the fund’s discount has gotten wider lately, despite its strong total return these past seven years: Bond Bears Trash a Perfectly Good Fund  I suspect this latest widening is due to the conservative retail investors who dominate the CEF market. They simply hear the words “bond selloff” and cut back on all bond funds, including durable payers like PDX. Something else they’re forgetting: PDX’s discount can’t last forever, since the fund comes to term in 2031, at which point it will be liquidated at par. So that discount works in our favor the longer we hold. Their loss is our gain. Especially when you consider that the fund can cover its dividend simply by purchasing the average high-yield bond, which yields around 7.4% today. That’s higher than PDX’s yield when calculated on NAV, not the 11.9%-discounted market price: 6.9%. That 6.9%, in other words, is what management needs to earn in the market to cover PDX’s 7.8% payout to us. Next up, leverage: As I write this, PDX borrows against 22% of its portfolio. That’s modest for a CEF: high enough to meaningfully boost returns, but not so high as to cause excessive damage in a downturn. That sets the stage for more hikes to PDX’s regular payout and puts more special dividends on the table. And at an 11.9% discount, we can see that investors have not priced any of this in. That’s our cue! |
The UK income trust is performing well but has an unusual structure. We take a deep dive into its portfolio and positioning
Published on September 4, 2026
UK equity income trust Law Debenture (LWDB) has had a strong 2026 so far, returning around 21 per cent – well ahead of the 12 per cent delivered by its benchmark, the FTSE All-Share.
Its longer-term performance looks even more impressive: over three and five years, it is the second-best-performing trust in the 17-strong UK equity income sector and takes the top spot over a decade with returns of 267 per cent.
A consistent approach has been key to this result. James Henderson has been involved in running the trust for over 30 years and was joined by Laura Foll as joint portfolio manager in 2019.
In July, the trust announced that Henderson will be retiring next June, leaving Foll at the helm. Such a high-profile departure would typically spark concerns about style drift, but analysts seem to think it is unwarranted this time because Foll and the veteran manager have worked side-by-side for many years.
We take a deeper look at Law Debenture’s approach and speak to Foll about how the managers are positioning the portfolio.
The pair adopts a moderately contrarian approach to find well-managed companies at low valuations. They seek to avoid concentration, maintaining around 140 holdings. “This is not a shortlist, high-conviction portfolio. It’s about having a long list of companies that we think are, on balance, too cheap,” Foll tells the IC.
This means they do not take big bets on individual stocks, and instead aim to invest across a broad range of assets. The top 10 holdings make up just 25.9 per cent of the portfolio. “We’re deliberately not taking too much stock-specific risk. We want [the portfolio] to be diverse rather than having big chunky holdings in any particular name,” explains Foll.
On this front, Law Debenture differs from rival Temple Bar (TMPL), which is the best-performing UK equity income trust over five years and has benefited from taking bigger contrarian bets.
Law Debenture is unique in that 15 per cent of its net asset value (NAV) comprises an independent professional services (IPS) business it owns.
This provides third-party financial services, such as pension trusteeship, and the profits it generates are redistributed as dividends to Law Debenture shareholders. Martyn King, an analyst at Edison, describes it as “a very important part of the trust’s overall performance” as the business has funded roughly a third of the dividends the trust has paid in the past 10 years.
This makes for a dependable income stream. “I basically know that at the start of any calendar year, when I turn up on day one, a third of the income is pretty much in the bag,” says Foll. This, in turn, affords the managers flexibility to invest in stocks not paying dividends that are not traditionally found in other UK equity income portfolios.
That’s not to say the trust eschews the usual UK income payers altogether. A look under the bonnet reveals HSBC (HSBA), Shell (SHEL), GSK (GSK) and Rio Tinto (RIO) among the five largest holdings.
The Oracle of Omaha has never stopped looking ahead.
By John Bromels– Sep 21, 2026
I turned 50 years old last week: Living proof that age and maturity don’t always go hand in hand.
I can think of only a few things that have stayed the same over those 50 years. I’ve had red hair the entire time. Washington’s portrait is still on the dollar bill. And, for that entire half-century, Warren Buffett was Chairman of Berkshire Hathaway
But on Friday — the day after my birthday — Buffett released a farewell letter, announcing he was stepping down from that position, effective immediately. I don’t believe the two events are related.
As usual, though, the “Oracle of Omaha” added some sage wisdom to his letter, including the most devastating four words of investment wisdom I’ve ever heard.
Here’s what he said and what it means for investors.
Warren Buffett. Image source: The Motley Fool.
Buffett is nearly twice my age.
“Recently, I celebrated my 96th birthday with family and friends, including one of my great-grandchildren, who had just turned one,” he wrote in his letter. “He’s moving a bit faster than I am these days.”
Buffett then revealed that he was stepping out of the “Chairman” role he’s held since 1970, and into the role of “Chairman Emeritus.” His son Howard Buffett — who has been on Berkshire Hathaway’s board for 33 years — has succeeded him as Chairman.
But then Buffett gave the four devastating words that should be a wake-up call to all investors:
“Father Time always wins.”
On the one hand, Buffett’s statement refers to the inevitability of aging. But those four words also sum up his thoughts about investing.
Image source: Getty Images.
Father Time does always win. That’s true both in life and in the stock market.
Buffett’s “buy and hold” strategy used time and compound interest to gradually turn small positions into massive wealth engines. The strategy made him a billionaire and Berkshire a trillion-dollar company.
And he wasn’t shy about proclaiming it, either. “If you aren’t willing to own a stock for ten years,” he said in 1996, “don’t even think about owning it for ten minutes.”
That’s another thing that hasn’t changed in 50 years: the U.S. stock market has always gone up. Since I was born, the S&P 500 has risen 2,100%. But with the compounding power of reinvested dividends, its total return has been 4,530%. No wonder Buffett famously said, “Our favorite holding period is forever.
Buffett doesn’t end his farewell letter with, “Father Time always wins.” Instead, he goes on to say, “[Father Time] has, however, been generous with me. He has given me the opportunity to see Berkshire reach a point where I am more confident than ever about what lies ahead.”
It’s impossible to look at the history of the S&P 500 and not be confident about where the market is headed over the long term. Even with major market crashes like the dot-com bust and the Great Depression, those who stayed invested in stocks still generated incredible returns over time, faring much better on average than those who jumped in and out.
So, even without Buffett in the Chairman’s seat at Berkshire, his advice — and his buy-and-hold philosophy — are still winners, thanks to Father Time.
MGCI’s yield should rise if interest rates are hiked.
Overview
M&G Credit Income (MGCI) owns a highly diversified portfolio of fixed income assets and offers a very high yield (7.7% at the time of writing) without taking the risks that would typically be required to achieve it, and without the use of structural gearing. The trust invests across all segments of the public and private debt markets, taking advantage of M&G’s deep resources to exploit the extra yield that can be earned in complex and illiquid securities, all within a closed-ended wrapper which facilitates this while providing the end investor daily liquidity.
Many of the specialist areas it invests in offer floating rate coupons, meaning that as interest rates rise, the income the trust receives rises too. With central banks currently under pressure to raise rates, and 78% of the portfolio offering as floating rate coupon, this could be a particularly attractive feature. And as the trust’s dividend policy is to pay 4% of NAV plus SONIA (an interbank rate which tracks the base rate) each year, the dividends paid by the trust will rise if rates are indeed hiked.
One of the key objectives of the trust is to deliver this high yield along with low NAV volatility. To that end, the manager Adam English takes a defensive approach to sector and stock selection and a relative value approach when it comes to making investments. Over the past two years the portfolio has been very defensively positioned, with Adam unimpressed by the spreads being offered for credit risk. Nonetheless, the trust paid its high dividends, aided by the flexibility of the mandate. Over 2026, however, Adam has made significant investments in new private debt assets, which has seen the proportion held privately rise. This should hopefully feed through into higher portfolio income, although MGCI has also continued to see strong inflows which are initially parked in higher quality, liquid assets. The trust has been on a premium for most of the past two years, and this stood at 2% at the time of writing.
The board has consequently announced a placing and retail offer of new shares to be issued at a 1.5% premium, with the fundraising to close on 20/10/2026.
Analyst’s View
We think M&G’s combination of high yield and defensive positioning should appeal to lots of income-seeking investors, which explains the premium rating for most of the past two years. In particular, the ability to avoid taking duration risk is attractive with the prospect of rate hikes on the horizon, and some analysts expecting structurally higher rates in the current cycle. Perhaps more importantly, investing in assets of high credit quality is particularly appealing given how expensive public corporate bond and high yield markets are. Given these markets are cyclical, tight spreads imply the potential for significant losses at some point, even if it is not clear what will see this multi-year environment end. An economic slowdown or recession accompanied by higher interest rates could be one way, if it leads to default rates ticking up and credit selling off, and MGCI should appeal to cautious investors concerned about this possibility. We note that MGCI delivered steady NAV performance through the volatility seen in Q1 when the war in the Gulf broke out.
Of course, the primary appeal is the potential to receive a higher income if rates do rise, along with this defensive portfolio performance. MGCI’s yield is paid quarterly, without the use of structural gearing. The spread of 400bps over SONIA should be attractive in relative terms even if rates fall. We note the recent investments in private debt have helped the portfolio income rise, and Adam is confident that, with spreads at historic tights, there will be opportunities in the coming years to invest at much wider yields and for portfolio income to exceed the dividend target in a later stage of the cycle.
Kepler
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