Investment Trust Dividends
VPC Specialty Lending Investments PLC
(the “Company”)
MONTHLY NET ASSET VALUE PER SHARE
Net Asset Value
The Company is pleased to provide its monthly net asset value per share (“NAV”) update.
As at 31 January 2024, the unaudited estimated NAV (Cum Income) per Ordinary Share (ISIN GB00BVG6X439) was 83.18 pence.
This NAV has been calculated by CITCO Fund Administration (Cayman Islands) Limited
I’ve sold the portfolio shares in Foresight Solar for a profit of
£66 and a total profit for the blog of £343.00.
The intention is to switch into PHP property where the dividend
is as ‘safe’ as u can get in the market.
The Motley Fool
Compound dividends now for the future.
Not only does Buffett own a lot of shares, his company Berkshire Hathaway owns stakes in a wide variety of businesses. Berkshire throws off a lot of spare cash each year, yet it does not pay a dividend. Why?
Buffett prefers to reinvest the money in building Berkshire, for example by buying more businesses’ shares.
Berkshire Hathaway’s Warren Buffett Offers Advice to Investors: Patience and Long-Term Gains Over Pundit Predictions
As a small private investor, I can do the same thing to try and build my passive income streams. Rather than taking out dividends as cash, I can simply reinvest them in more shares.
In the short term, that means I would not see the dividends hitting my bank account as cash. Over the longer term though, it could enable me to build my share portfolio even if I did not put in any more money myself. That could hopefully enable me to earn more passive income in future.
Admit mistakes
Buffett has made some great investing decisions. But he has also made ones that turned to be very expensive mistakes. An example was the Tesco stake he built then sold at a large loss around a decade ago.
Sometimes, when owning a share that has generated substantial passive income in the past, it can be difficult to recognise that the business is changing and is unlikely to be as lucrative in future. But dividends are never guaranteed and past performance is not necessarily an indication of what will come in future.
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Rule 2 of 2.
If a Trust drastically alters its dividend policy it must be sold even at a loss.
a. The portfolio invests only in Investment Trusts as most Trusts have a reserve of cash to pay dividends in dire times.
b. There are plenty of Trusts paying above long term average yields, one percent compounded makes a huge difference to your final ‘pension’.
c. As in the example below, say DS Smith stops paying a dividend, it will make very difference to the Trust, unlike if u held the share. Also there is a chance of a takeover bid, many a mickle makes a muckle.
d. Trusts often trade at a discount to NAV, giving the patient an opportunity to sell some shares at a profit and then re-invest that profit into other Trusts to earn more dividends. The Snowball effect.
Abdrn Equity Fund
KEY INFORMATION
Story by Christopher Ruane
Passive income is as simple an idea as it sounds: earning money without working for it. But while the idea may be simple, the reality can be more complicated. A lot of people put time into plans that seem anything but passive to me.
By contrast, my approach of earning dividend income by investing in shares involves very little time commitment on my part. Here is a description of how I could use such a plan to target a weekly passive income of £100.
Buying dividend shares
Not all shares pay dividends, even if they have done so in the past. So when building a portfolio with the objective of passive income, I focus on the long-term cash generation potential I think a business has.
For example, does it have some unique advantage in a field likely to experience ongoing high customer demand? Could that be turned into profits that can fund dividends, or might they need to be used for other purposes, such as paying down debt?
An example of a share I own for its passive income potential is financial services company Legal & General. I expect demand for financial services to remain high in the long term. With a large customer base and strong brand, I think Legal & General has a competitive advantage within that field.
At the moment, its dividend yield is 9%. That means that for every £100 I invest in Legal & General shares today, I will hopefully earn £9 in dividends annually.
I say ‘hopefully’ because dividends are never guaranteed. So although I happily own shares in Legal & General, they form only one small part of a portfolio diversified across a range of companies and industries.
Aiming for a target
Still, although dividends are not guaranteed, I use the average prospective yield of my portfolio to predict my passive income.
If I wanted to target £100 a week (£5,200 annually) then, if I earn an average yield of 5%, I would need to invest £104,000 to hit my target. If I managed an average yield of 8%, by contrast I could hopefully hit my target by investing £65,000.
But I would not invest on the basis of yield alone. Instead, I always look at what I think are a company’s long-term financial prospects and its valuation. Only then do I consider the yield.
Step by step
But many people do not have a spare £65,000 or more sitting around. Even starting with nothing, I could still work towards my passive income objectives. I would start by setting up regular payments suitable for my own financial circumstances into a share-dealing account, or Stocks and Shares ISA.
After that, I would use the money to buy more shares over time and build up my portfolio. Although doing that could take me years to reach my £100 weekly passive income target, I would hopefully earn dividends along the way.
Europe
We have often advocated European companies as being an interesting, yet often underappreciated area of the market that offers exposure to global leaders, that just happen to be headquartered in Europe. A recent article in the FT drew attention to the continued strong performance of 11 European companies known as the ‘Granola’ stocks. In contrast to the Magnificent Seven, which are currently the seven largest companies in the MSCI World indices, the Granola stocks were identified by a Goldman Sachs analyst in 2020 as representing a collection of companies which all had strong balance sheets, low volatility earnings growth, and good dividend yields. This collection of companies did well in the ten years up to February 2020, when they were first identified. The 11 Granola companies (or more accurately Grannnolass…) consist of GlaxoSmithKline, Roche Holding, ASML, Nestlé, Novartis, Novo Nordisk, L’Oréal, LVMH, AstraZeneca, SAP, and Sanofi. Strong performance in aggregate continued during the Coronavirus sell-off and subsequently. We note that these do not represent the largest companies in the European Index, which as of 31/12/2023 also included several energy companies, banks, insurance, miners, and consumer staples.
According to the FT article, the 11 Granolas have generated around 50% of the European stock market’s gains over the last 12 months (to mid-February 2023), and their combined market capitalisation has reached nearly 25% of the Stoxx Europe 600, which is nearly equivalent to the Magnificent Seven weighing in at 29% of the S&P500. Whilst the article claimed that Granola’s dominance was echoing that of the Magnificent Seven in terms of the impact of concentration on portfolios, we are not quite so sure. The difference comes in the size of these companies, and therefore their relevance to a non-European focussed investor.
We have analysed the Magnificent Seven and the Granola stocks share of the Morningstar Global Markets Index (which is equivalent to MSCI World). As of 31/12/2023, the Granolas represented just 3% of the Global Index. So, these 11 companies combined, in a variety of different sectors, represent less than either Apple or Microsoft’s weighting in the global index. This may be concentration, but it is a pretty dilute concentrate! As the Granola’s illustrate, many of Europe’s leading businesses have no US or other significant global competitors of note. They clearly offer an opportunity to access strong growth, but with very different drivers and risks than the Magnificent Seven expose investors to.
Of the seven large-cap AIC Europe trusts, all but one hold Novo Nordisk as the largest or second-largest holding in the portfolio, the exception being Baillie Gifford European Growth (BGEU), which has only one of the Granola stocks in its top ten holdings and looks very different to the rest. BlackRock Greater Europe (BRGE) has been an impressively strong performer over the long term, with its concentrated portfolio focussed on high-growth opportunities across Europe. Manager Stefan Gries leads a team focussed on stock picking. The portfolio is exposed to a number of long-term secular growth trends and typically has low turnover and long holding periods, all of which have contributed to an outstanding long-term track record. BRGE has been awarded one of our 2024 Growth Ratings.
Thematic
Staying in equity markets, but looking for non-crowded growth opportunities, one might look at thematic funds. High-growth technology opportunities of a very different flavour to those of the Magnificent Seven can be found within the likes of Impax Environmental Markets (IEM). IEM targets companies in a range of six different environmental sectors, such as efficiency & waste management, water, sustainable food, and energy. The trust has a distinct bias towards mid and small caps, which offers investors a very different exposure to that found in most global equity portfolios. That said, the small-cap growth focus has cost it dearly relative to the wider global indices over 2023. We think it noteworthy that the managers of BlackRock Energy & Resources Income (BERI) have noted the underperformance of the “energy transition” universe of companies that they follow and have been adding exposure to this area. BERI offers another very different exposure to world markets, with a strong thematic flavour, but with an element of in-built balance. Strong performance is reflected in BERI having won a Kepler Growth Rating for 2024. The growthier opportunities in the energy transition part of the portfolio complement the “value” characteristics that traditional energy and mining stocks offer. As a result, relative to world equity markets, it offers a potentially interesting place to find shelter from any mega-cap technology storms that may break over the horizon.
Asia
Global indices, and some might say the global economy, seem inextricably linked to China. However, Asian stock markets have also tended to be correlated to China, given its position as the economic powerhouse of the region. Certainly, this seemed to be the case until 2023. With economic growth moderating, combined with heightened political tensions with the US, it has also performed poorly over the short term. In fact, just as we show in the graph below, as China has stumbled, India has powered ahead.
Ashoka India Equity (AIE) has been the best-performing trust since it launched in July 2018, and this strong performance continues. It won a Kepler Growth Rating for 2024, the first year that it had a track record long enough to be considered, and continues to issue shares this year, when most trusts appear to buying shares back trying to protect their discounts. AIE has a natural tilt towards small and mid caps, but the team also favour higher-quality businesses and place a great deal of weight on good governance. The team have recently been adding exposure to companies in some more highly regulated areas in which they are typically light. This is in order to ensure their stock-selection successes are not outweighed by the impact of a surge in the more regulated, state-owned sectors, given the current government looks set to win elections this year.
Alongside India, it may also make sense to look at Vietnam, which shares some high-level characteristics, both being at earlier stages of their development than China, and both might arguably have now achieved ‘escape velocity’ from the traditional orbit of Chinese growth. In particular, Vietnam is one of the countries benefitting the most from the decoupling of US/China trade, all while it is continuing its long-term liberalisation of its economy and markets. Vietnam Enterprise Investments (VEIL) sets out to benefit from these trends, using the deep knowledge and connections of a locally-based management team. VEIL has delivered strong long-term returns in both absolute and relative terms. Returns in Vietnam tend to be volatile, and 2022 was a tough year, but 2023 has seen a decent recovery in the market. The managers tell us they are growing increasingly bullish and have increased their weighting to cyclical, economically sensitive companies in anticipation of strong earnings growth over the next few quarters.
INDIA & CHINA DIVERGE
Source: Morningstar
Past performance is not a reliable indicator of future results
Japan
Japanese stock markets are now surpassing the 1989 peak in nominal terms. That said, Japanese small caps—particularly those focussed on growth—have had a torrid time in relative and absolute terms during 2023. One might argue that growth opportunities in Japanese small caps are as far as it is possible to be from the Magnificent Seven but the current narrative around these companies is one of intrigue, offering a potentially differentiated source of growth opportunity buoyed by a number of tailwinds. Perhaps most compelling of all is the optimism around recent corporate governance reforms.
Over the course of 2023, a lot of investor attention was steered towards the more liquid and easily traded large companies that had already demonstrated positive changes. However, the manager of Fidelity Japan (FJV) argues that these changes are starting to trickle down the market-cap scale presenting a plethora of untapped opportunities. Mid and small caps are a relatively under-covered part of the market, which means being locally based and having access to a dedicated on-the-ground team, provides the manager with valuable insight into company management and the domestic market that others in the sector might be missing. Over the last year, two opportunities with good long-term potential were unearthed—Harmonic Drive Systems and Taiyo Yuden, both of which fall into the electric appliances sector. Both companies are sitting at attractive valuations, versus overseas and large-cap domestic peers and offer a differentiated source of returns.
Following a similar vein, JPMorgan Japan Small Cap Growth and Income (JSGI) also provides exposure to this part of the market. The manager believes there is huge potential for active management to add alpha in this part of the market, evident by its recent investment in Osaka Soda. It’s a global chemical company positioned in multiple niche product categories, but its biggest future growth driver, in the manager’s eyes, is silica gel, which is used in the same GLP-1 obesity drugs that have driven Novo Nordisk’s recent success. Furthermore, the manager argues that the average valuations of Japanese companies remain attractive compared to most other major markets and the longer-term potential for improved shareholder returns– bodes well for Japanese equities, which in their eyes, position the portfolio well to capital on future growth. Recent pressure on Japanese small caps has led to poor performance over 2023, these types of companies can kick back quickly when these pressures alleviate.
As we highlighted above, the Magnificent Seven have suffered a painful stumble before, and in any event, nothing lasts forever. We have illustrated a number of very different growth opportunities, that over the medium term could complement a portfolio. In our upcoming virtual ‘Themes for your ISA in 2024’ event, three of these managers are presenting
The Motley Fool
In my opinion, it’s never too late to put in place a strategy to generate passive income.
But everyone’s individual circumstances are different. This means some leave it until later in life before addressing the issue of how they’re going to have enough income to fund a comfortable retirement.
Assuming a retirement age of 67, starting at 40 still leaves 27 years to build a nest egg.
My strategy (indeed, one I’m already following) would be to save as much as possible and buy UK stocks.
I’d keep reinvesting any dividends received and then, when the time comes to retire, switch into high-yielding shares, and live off the passive income.
Fabulous five
According to AJ Bell, the average yield of the five best dividend stocks in the FTSE 100 is currently 10%.
But it’s important to remember that returns to shareholders are never guaranteed.
And a stock with a high yield might be a value trap — a share that looks to be a bargain but is the opposite.
However, for the purposes of this exercise, I’m going to assume that it’s possible to generate a 10% annual return.
The golden years
The next issue to be addressed is how much income I’m going to need later in life.
It’s usually assumed that less is required in retirement.
The UK average salary is currently £34,963 a year. Let’s say I will need around 50% (£17,482) of this for a comfortable lifestyle.
At first sight, this might appear to be an alarming drop from the average, but remember, the State Pension age is also 67. Those eligible will receive £10,600 a year at today’s rate to add to that amount.
Assuming a yield of 10%, an investment portfolio of £175,000 is required to generate an annual income of £17,500.
Possible returns
So, how much will a 40 year-old need to save to reach my earnings target? The answer depends on the rate of growth of the stock market.
From 1984 to 2022, with dividends reinvested, the average annual increase in the FTSE 100 was 7.4%.
Again, this isn’t necessarily going to be repeated.
But if it was, investing a lump sum of £2,054 at the start of each year, for 27 years, would turn into £175,064.
Assuming our ‘fabulous five’ continue to deliver the same returns as they do now, this would provide me with an annual income of £17,506.
It’s possible to exactly match the performance of the FTSE 100 by investing in a tracker fund.
However, other stocks have historically delivered better returns. For example, over the past five years, Frasers Group has seen its share price increase by 193%.
By contrast, the stock of International Consolidated Airlines Group has fallen 64%.
A tracker would help reduce the risk of buying the ‘wrong’ stocks.
Final thoughts
But all of these figures are sensitive to the assumptions made.
If the FTSE 100 grew at a rate of 5.3% (the historical return without dividends being reinvested) it would take another six years to achieve the same result.
If I invested for another 13 years, at 7.4% per annum, my retirement pot would be £448,445.
Clearly, it’s better to start earlier than 40, and save more.
But don’t let the perfect be the enemy of the good. My advice would be — whatever someone’s age — they should start investing!
It’s all random, isn’t it ?
The market is showing it wants to go higher but not yet.
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The Motley Fool
by John Fieldsend
A recent study put the average UK household saving at £180 a month. Putting a couple of hundred away monthly is to be applauded and this level of saving can even lay the groundwork for a lifelong second income.
Creating an income stream from average savings — around £6 a day — sounds like a tall order. But new savings vehicles with low fees and easy-to-use platforms have simplified getting big returns on investments. A passive income stream that lasts for life is easier to achieve than ever, I’d say.
More and more people are targeting this kind of income too. Some 4,000 people have reached £1m in ISAs now with around half of them hitting the figure in the last year alone.
Reaching the million-pound mark given the deposit limits on those accounts is impressive indeed, but such a large nest egg isn’t needed for a life-changing income.
Losing cash
I’ve been working towards something like this myself, and for me, financial security is what appeals most. The State Pension isn’t really enough to live on (and only 38% of under 35s expect to receive it). Plus near-double-digit inflation makes saving in cash look unattractive.
Inflation is a killer for average savers. Our society is built around low levels of inflation, it’s true. While keeping cash circulating benefits an economy, it hurts savers who see their cash lose value constantly.
Even single-digit levels of inflation can be devastating. A 5% inflation rate means prices double after just 14 years. In other words, a £3 sandwich becomes £6. Perhaps more pertinently, £1,000 of savings will have the buying power of £500.
While current inflation levels are unusually high, whichever way you slice it, all of us are seeing our cash being worth less and less. And with money losing value, I see inflation-beating investments as a no-brainer.
Let’s waste no more time then. On to the strategy. My plan essentially requires two things: a return above inflation and compound interest over decades.
What I’m doing
For inflation-beating returns over years and years, I see no better option than investing in high-quality stocks.
Wait a second! The stock market? Isn’t that risky? Won’t I be competing with bankers working 80-hour weeks and lightning-fast algorithm traders?
Well, the answer is no, for the most part. While the stock market has plenty of high-risk, high-reward gambles, I won’t be touching those. My investing strategy is boring and slow – although the risk can never be fully removed and I may still lose money.
I invest the same way as billionaire Warren Buffett. He doesn’t buy stocks for a few days, but for a few decades. He says his “favourite holding period is forever”.
Slow and steady
By looking long term, I can enjoy the inflation-busting effect of stock market returns while avoiding the erratic ups and downs of day-to-day share price moves.
Better still, £180 a month is more than enough to dip my toe in the water. These days, fees to buy stocks are only a few pounds with modern platforms like Hargreaves Lansdown or AJ Bell that make it simple for anyone to invest.
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Consider ii but DYOR
In general they charge a percentage of funds and
AJ Bell a maximum figure that will increase over time.
The Group anticipates EPRA NTA per share to be approximately 89p (December 2022: 103p) due to the increased number of shares in issue following the £25 million equity raise in September 2023 for the Gyle acquisition.
7.3% increase in proposed final dividend of 2.95p per share delivering a total dividend for the year of 5.70p per share (December 2022: 2.75p per share and 5.25p per share, respectively.
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