Month: December 2023 (Page 2 of 3)

The dividend stream fcast for 2024 is already in excess of the amount u could

receive from an annuity.

If u buy an annuity u have to surrender your capital where with

a dividend stream u keep all your capital, to pass onto

friends/relatives and some for those wee cats and dogs.

The portfolio earned £9,422 in dividends against the target

of £7,000.

The forecast for 2024 is £8,000, a yield of 8% on

seed capital, to be re-invested to earn more

dividends to be re-invested, the snowball effect.

AEI is delivering a sector-leading yield, with low valuations offering strong capital growth potential…

Overview

Manager of abrdn Equity Income Trust (AEI), Thomas Moore, aims to deliver three key goals: provide a high income, provide an income that grows over time, and provide capital growth. To achieve these goals, Thomas has considerable flexibility, allowing him to invest across the UK market cap spectrum with an index-agnostic approach. This allows him to find the best opportunities, that often trade at attractive valuations as they are overlooked by other investors .

The trust is one of the highest yielders in the sector at 7.5%, and the dividends are fully covered by revenue. The manager believes this yield is solidly supported, and its future growth is assured by the diversified portfolio, including the small- and medium-sized companies, and strong underlying revenue growth. Looking forward, Thomas believes a turnaround in macro factors should begin to support a market recovery, with low valuations offering a lot of potential.

Gearing is typically a structural element of the trust and has been used to support the high dividend. The current level is approximately in line with the trust’s neutral level to allow the portfolio to capitalise on the low valuations and support outperformance should the market rebound.

The trust’s Discount narrowed sharply in the past 12 months. The trust traded close to NAV for much of the past year which has enabled the board to issue shares and increase the size of the trust.

Analyst’s View

Thomas has achieved his goal of delivering a very high yield, making AEI one of the best yielders in the sector and delivering a very competitive yield level from equities. He has also delivered another year of dividend growth, which the manager believes is well supported going forward by the underlying portfolio, including the benefits of a diversified portfolio such as holding small- and mid-caps. We understand the dividend growth track record, currently 23 years, is likely to be a key focus of the manager and, in our view, the prospects for dividend growth are strong. We think for those seeking high-income generation from their equity holdings, AEI makes for a compelling offering.

In our opinion, the UK market is significantly undervalued, and this could lead to an improvement in capital returns from the trust. We understand this is now a focus for the manager with the income profile well supported. We believe the trust would benefit from a change in market sentiment, with one ‘bucket’ in the portfolio used specifically for identifying undervalued opportunities. We would expect the small and mid-cap bias to be supportive in any recovery as they typically perform better in rising markets. The differentiation these holdings provide could also help with relative performance.

Furthermore, the high level of structural Gearing could support the trust on the upside should sentiment improve. As such, we believe AEI would be a significant beneficiary of a turnaround in market sentiment and would be well-placed to capture a market rally.

Bull

• Very high covered yield that is delivering growth
• Differentiated portfolio including a bias to small and mid-caps
• Trust has recently reduced its charges

Bear

• Gearing is high which can amplify losses as well as supporting upside potential
• Value-tilted portfolio could struggle in a growth driven environment
• Small and mid-cap bias would likely struggle should a reces

KEPLER

When the Nobel Prize-winning scientist Albert Einstein was asked to identify the most powerful force in the universe, he is said to have replied: “compound interest”. It’s no joke to say that the mathematical phenomenon of compounding or the ability for gains to grow on gains and income to arise from income provides a powerful tool for anyone seeking to accumulate wealth.

However you will need time to make it work

Three stages of a chart, up, down or sideways.

The blog rules there are only 2.

1. Buy Investment Trusts that pay a ‘secure’ dividend to buy
   more Investment Trusts that pay a ‘secure’ dividend. The snowball effect.
2. Any Trust that drastically changes it dividend policy will be
   sold even at a loss.

Plan
Option A
After ten years to take a ‘pension’ of
16k on seed capital of 100k where u keep your capital.

Option B
You gamble with your future by trading TR
where u plan to buy an annuity with an unknown sum,
which could be x times £2,195.

Canada Life figures show the 65-year-old with a £100,000 pension pot could buy an annuity linked to the retail price index (RPI) that would generate a starting annual income of £3,896. That’s up from £2,195 in the New Year following a 77% spike in rates this year.
Oct 22

2024 will u gamble with you future or invest for your families future,
the choice is yours.

The Motley Fool

3 steps to increase income from dividend shares in 2024
Dividend shares have long been a powerful tool for generating passive income. But with 2023 coming to a close, many investors are now looking for new ways to bolster this income stream. There are various ways to achieve this, and not all of them require injecting more capital into the stock market. Let’s take a look.

1. Set an income goal
The first step is to look at what a portfolio is already generating in terms of yield. On average, the FTSE 100 delivers around a 4% yield. But depending on the strategy an investor is following, this income stream could be higher or lower.

Let’s assume a portfolio contains a blend of income and growth stocks, subsequently resulting in an overall yield of 3%. With that number at hand, investors can now pick a new target pay out. For this example, let’s say an investor wants to boost this yield to 5% in 2024. What should be the next step?

2. Portfolio rebalancing
Not every household has the luxury of earning excess cash right now. After all, the cost-of-living crisis is ongoing for many, and the economic conditions are far from ideal. However, it’s still possible to source some capital by reorganising what’s already in an investment portfolio.

If dividends are the goal, then perhaps it may be worth examining growth-oriented positions. A review of each company could reveal a broken investment thesis. Or perhaps firms may simply not be living up to previous expectations. As such, investors need to decide whether an opportunity cost exists. In other words, while dividends may deliver lower returns, are they a more reliable way to grow wealth?

Dividend shares should also be looked at under a microscope. There are hundreds of income shares on the London Stock Exchange, and not all of them are worth owning. Higher-yielding opportunities could be hiding in plain sight, and simply swapping out underwhelming shares for superior ones could help push a passive income stream to new heights. Of course, the question then becomes: how do investors find these superior opportunities?

3. Identify the best income shares
All too often, income investors become fixated on the yield that a stock is offering. Yet in practice, this can lead to critical errors. While exceptional, there are multiple stocks in the FTSE 350 that are currently offering a sustainable dividend yield of around 10%.

At first glance, they sound like bargain buying opportunities if shareholder pay outs can indeed be maintained. However, in most cases, these yields are being driven by a rapidly falling stock price due to rising concerns about the long-term outlook. Therefore, while dividends are chunky, the continued decay of the share price offsets any gains made, resulting in the destruction of wealth despite passive income increasing.

One example of this is, in my opinion, British American Tobacco. With health regulations worldwide becoming increasingly strict, the future of the cigarette market looks bleak at best. And even the management team agrees. That’s why the firm is rapidly accelerating its transition to non-combustible products, but whether it can do so fast enough has yet to be seen.

In short, investors targeting a higher portfolio yield need to look beyond shareholder pay outs of attractive income shares. Only then can a tremendous income opportunity be discovered.

The post 3 steps to increase income from dividend shares in 2024 appeared first on The Motley Fool UK.