Expected dividends for the current portfolio. 2024 target 9k.

June £678.00

July £1,406

August £167

Forward 3 month fcast total £2,251

Cash for re-investment £415.00

All subject to change and some dividends could slip into the following month but of course that wouldn’t change the yearly total.

9k is the target for the end of 2027, although when u start to compound the difference in totals are not huge but many a mickle makes a muckle.

The emotional benefits of dividend re-investment. In fact, with this investment strategy you can actually welcome falling share prices.

The Motley Fool

Everyone’s talking about passive income. Here’s how investors could start making it today.

By Charlie Keough

A quick Google search of the phrase ‘passive income’ returns a staggering 151m results. But there’s one definition that stands out.

It comes from fabled investor Warren Buffett. He said: “If you don’t find a way to make money while you sleep, you will work until you die.” It’s a quote that’s stuck with me.

Making passive income has become incredibly important over the last few years with racing inflation eating away at pockets. As such, I can see why investors are keen to start making some extra cash alongside their main source of income.

If I were starting today, here’s how I’d go about it.

Buying stocks
There are plenty of ways to make additional income. But arguably the simplest is buying shares that pay a high dividend yield.
I could start a side hustle or try and enter the property game. But I’m targeting companies that share profits with shareholders via dividend payments.

What constitutes a high yield is subjective. For me, I tend to largely target companies that pay a yield over 5%. For context, the FTSE 100 average is 3.9%.

Finding the right businesses
Investors also need to do their due diligence. While some yields may look attractive, they may not be sustainable. We saw this most recently with Vodafone’s 11.4% payout, which is now being halved in 2025.

I target businesses that operate in mature industries with proven business models and stable cash flows. Given that dividends are never guaranteed, a strong track record of paying investors is also key.

Let time do its thing
It’s taken investors like Buffett decades to build the large passive income streams they receive today. And there’s a lesson in that. Building these streams doesn’t happen overnight.

It’s a long-term process. Take his investment in Coca-Cola. He bought the stock back in 1988 and added to his position over a couple of decades. Last year, he received a dividend cheque worth more than $736m from the company.

Coupled with adopting a long-term approach, I’d use compounding. By reinvesting my dividends, I can earn interest on my interest. Over time, that can super-boost my wealth.

An example
That’s all well and good, but I’m not going to leave here without giving an example that ticks the above boxes. That’s where Legal & General (LSE: LGEN) enters the frame.

It’s an insurance and asset management company and a stalwart in its field. There are a few more reasons why I hold the stock. Let me briefly explain.

Firstly, it has an 8.6% yield. That’s comfortably above the 5% benchmark I look for. Secondly, it has increased its payout by 80.8% over the last decade.

Of course, like all investments, there will be volatility. Right now, the business is facing headwinds as high interest rates impact deposit levels. But given its position as an industry leader, it’s stocks like Legal & General I’d target.
£15,000 invested in the stock today with an 8.6% yield will give me an investment pot of £196,144 after 30 years, assuming I reinvest my dividends. By year 30, this would pay me £16,108 a year, or £1,342 a month, in passive income

That’s a healthy amount of cash that would no doubt go a long way in allowing me to live a more comfortable retirement.

The post Everyone’s talking about passive income. Here’s how investors could start making it today appeared first on The Motley Fool UK.

Whatever I want to do with my free time, having a nice flow of passive income is likely going to help. It’s why I regularly invest in shares that pay me dividends.

Here’s how I’d build £1,000 a month in passive income starting from scratch.

Story by Ben McPoland

Getting started

Whether I’m beginning my investing journey with £10,000 or £100, I’d want to invest ina Stocks and Shares ISA. The reason is that they allow me to invest £20k a year without paying tax on any gains I make.

This is obviously a massive benefit to the wealth-building process, as well as saving me the hassle of working out my annual tax obligations to HMRC.

Specifically, it means I’ll get to keep all of the future passive income my ISA portfolio generates for me.

A company in great health

So, what type of stock would I buy once I’ve got my account up and running? Well, I’d focus on profitable companies that have strong competitive positions, pay generous dividends, and are trading cheaply.

One FTSE 100 stock that ticks all these boxes for me is Aviva (LSE: AV.). The  firm is a major player in the UK insurance market, offering a wide suite of products including car, home, travel, and life insurance.

In its recent Q1 results, the company reported that general insurance premiums increased 16% year on year to £2.7bn. Its workplace pensions business generated net flows of £2bn as it won 136 new schemes.

Attractive dividend and valuation

Turning to the stock, the valuation looks cheap. It’s trading on a forward price-to-earnings (P/E) multiple of 10.7, and a price-to-earnings growth (PEG) ratio of just 0.7.

The first is less than the FTSE 100 P/E average of 11, while the second is attractive because any PEG ratio under one suggests that the stock might be undervalued.

Now, I should point out that the share price is likely being weighed down by worries about a weak UK economy. Aviva could struggle to grow its profits if economic conditions remain challenging.

However, I think the risk is worth taking with the shares offering a juicy dividend yield of 7.2% for the current financial year. And while no payout is guaranteed, analysts do expect it to rise next year, giving the stock a forward yield of almost 8%.

£1k a month

Through a diverse portfolio of solid stocks like this, I reckon it’s possible to generate average long-term returns of 9%. That’s not guaranteed, mind you, and there will periods of underperformance.

But assuming I do, I’d turn £500 invested every month into £185,000 in just over 15 years. This would be with dividends reinvested.

At this future point though, I would be receiving £12,000 a year in dividends, assuming my portfolio was yielding just 6.5%. I could choose to take this as passive income or keep reinvesting to aim even higher.

The post Here’s how I’d build £1,000 a month in passive income starting from scratch appeared first on The Motley Fool UK.

The rules for the plan, there are only 2.

One. A portfolio of Investment Trusts that pay a dividend, to buy more Investment Trusts that pay a dividend.

Two. Any Trust that drastically changes its dividend policy must be sold, even at a loss.

Any trades posted to this blog are not recommendations to buy or sell as I’m not authorised to give advice but merely a diary record of any Trades.

The plan is to provide a ‘pension’ of between 14k and 16k on seed capital in a ten year period. The amount is not in doubt but the timescale, subject to markets, may slip. The current plans fcast for 2024 is to earn dividends of 8k with a target of 9k, the plan is currently ahead of both the fcast and the target.

Your own plan should be based on your own research and may will be different to mine depending on how many years u have in your accumulation stage, before u enter your de-accumulation stage. Hopefully, when u do enter de-accumulation u should be generating enough passive income to provide a ‘pension’ and some income for re-investment.

Our estimate of the number of investment companies trading at a 52-week high discounts over the past week is still relatively low, at 10. But does the appearance of three new names from the equity income and debt sectors signal tougher times lie ahead?

By Frank Buhagiar•04 Jun

We estimate 10 investment companies saw their discounts hit 12-month highs over the course of the week ended Friday 31 May 2024 – two more than the previous week’s eight.

New additions to the Discount Watch List include Diverse Income Trust (DIVI) from UK Equity Income, JPMorgan Global Growth and Income (JGGI) from Global Equity Income and Invesco Bond Income Plus (BIPS) from Debt. Now the discounts of JGGI and BIPS are, at less than -2%, both on the smaller side and what’s more did not prevent either fund from issuing equity over the course of the week. But throw DIVI into the mix and the question is, is the ever-lengthening timeframe for interest rate cuts to some point later in the year starting to have an adverse impact on discounts, particularly in interest rate sectors such as debt and equity income?

It’s a question we asked last week following the appearance of Finsbury Growth & Income (FGT) on the list. FGT’s discount has since narrowed, albeit slightly, but it remains close to year-highs. All eyes on next week then to see if any more equity income funds make an appearance.

The top-five discounters

FundDiscountSectorCeiba Investments (CBA)-68.99%

PropertyLife Science REIT (LABS)-57.73%Property

VPC Specialty Lending Investments (VSL)-43.92%Debt

JPEL Private Equity (JPEL)-40.67%Private

EquityOctopus Renewables Infrastructure (ORIT)-36.12%Renewables

The full list

Fund Discount Sector

Invesco Bond Income Plus (BIPS)-1.97%Debt

VPC Specialty Lending (VSL)-44.95%Debt

Develop North (DVNO)-1.44%Debt

Impax Environmental(IEM)-12.55%Environmental

JPMorgan Global Growth & Income (JGGI)-1.72%Global Equity Income

JPEL Private Equity (JPEL)-40.67%Private Equity

Life Science REIT (LABS)-58.73%PropertyCeiba Investments (CBA)-68.99%Property

Octopus Renewables Infrastructure (ORIT)-36.12%Renewables

Diverse Income Trust (DIVI)-10.03%UK Equity Income

Investment Trust Discounts – the Underlying Numbers

We estimate there to be 10 investment companies currently trading at year-high discounts to net assets, but if you take a closer look, a significant number are trading within 10% of their year-high discounts.

By
Frank Buhagiar
05 Jun

We estimate there to be 10 investment companies currently trading at year-high discounts to net assets. Compare that with the 35 plus we were reporting earlier in the year or the 55 plus seen in Q4 2023 when the narrative of higher for longer interest rates around the world took hold. With far fewer investment companies trading at a discount, it appears London’s investment company space is over the worst of its discount problem.

What’s more, two of the 10 trusts trading at year-high discounts over the course of the week ended Friday 31 May 2024, JPEL Private Equity and VPC Specialty Lending Investments, are currently in wind-down mode – share prices of companies realising assets can find themselves unloved, at least until the timing of when significant chunks of cash will be returned to shareholders becomes clear. The true number of 52-week high discounters arguably lower than the headline number suggests then.

Before hanging up the bunting, it’s worth taking a quick look behind the headline numbers. For the above sequence only tells part of the story – just those trusts trading at their highest (or lowest depending on one’s point of view) discounts to net assets for the year. What it doesn’t capture are those trusts that are trading at discounts close to their year-high levels. Not much difference, after all, between a trust trading at its widest discount of the year and one trading a handful of basis points off its high. A fuller health check of London’s investment company space is needed, one that takes into account those investment companies trading at or close to their 52-week high discounts. That way we can gain a clearer idea if London’s investment company sector is indeed over the worst of its discount problem.

A quick scan of London’s investment companies and the discounts at which they trade reveals the below list of companies trading within 10% of their year-high discounts:

Hansa Investment Company (HAN)

New Star (NSI)

Tetragon Financial Group (TFG)

Diverse Income Trust (DIVI)

UK Equity Income

Finsbury Growth & Income (FGT)

UK Equity Income

European Assets (EAT)

CC Japan Income & Growth (CCJI

JPMorgan Emerging Markets (JMG)

Syncona (SYNC)

Menhaden Resource Efficiency (MHN)

VPC Specialty Lending Investments (VSL)

Invesco Bond Income Plus (BIPS)

NB Distressed Debt (NBDD)

NB Distressed Debt Global Class (NBDG)

Digital 9 Infrastructure (DGI9)

Downing Renewables & Infrastructure (DORE)

Ecofin US Renewables & Infrastructure (RNEW)

NextEnergy Solar (NESF)

Asian Energy Impact (AEIT)

JPEL Private Equity (JPEL)

Schroder British Opportunities (SBO)

Schroder European Real Estate (SERE)

CEIBA Investments (CBA)

Property – Rest of the World

Develop North (DVNO)

Real Estate Credit Investments (RECI)

Third Point Investors (TPOU)

In total, 31 investment companies are trading within 10% of their year-high discounts. And among those listed, several are dealing with company-specific issues including, ongoing strategic reviews or realisation of their assets. Activity such as this generates a degree of uncertainty which in turn can lead to steep discounts. A further two investment companies, Invesco Bond Income Plus and Develop North, are trading on small year-high discounts that can hardly be counted as problematic at this point. In short, the investment trust sector’s discount problem, certainly not as painful as it has been in recent months.

And yet, the higher for longer interest rate narrative hasn’t gone away. If anything, as the months pass by, the narrative has got stronger. In the US, forecasts for the first rate cut are being pushed out to the end of the year/beginning of 2025. In the UK, with 2024 almost at the mid-point, the much-anticipated first cut has yet to happen despite many commentators predicting this would take place in Q1.

With increased uncertainty over the timing and pace of interest rate cuts, why then aren’t more investment companies trading at or close to year-high discounts? After all, interest rate sensitive sectors such as infrastructure, debt, renewables and equity income were regular features in our Discount Watch list when rates were being raised, and it was widely thought they would remain at elevated levels for some time.

So, the question is, will discounts play catch up and widen from here? Or will central banks come to the rescue by embarking on the long-awaited rate-cutting cycle?

The Results Round-Up – The Week’s Investment Trust Results
Which fund has generated a 4,733% NAV per share total return since its inception in 1995? And will AVI Global Trust’s focus on the unfashionable pay off in the long run?

The Results Round-Up – The Week’s Investment Trust Results
Which fund has generated a 4,733% NAV per share total return since its inception in 1995? And will AVI Global Trust’s focus on the unfashionable pay off in the long run?

The Results Round-Up – The Week’s Investment Trust Results
Which fund has generated a 4,733% NAV per share total return since its inception in 1995? And will AVI Global Trust’s focus on the unfashionable pay off in the long run?

By
Frank Buhagiar
07 Jun

JPMorgan European Growth & Income (JEGI) cautiously optimistic
JEGI’s total return on net assets for the year came in at +16.8% (debt at fair value), outperforming the benchmark’s +12.7%. A tick in the box for JEGI’s investment process which, as the Investment Manager’s Review explains, focuses on ‘companies with improving operational momentum, higher quality characteristics, and lower valuations.’ And even though not all investments held satisfy all three criteria, in aggregate the portfolio does. Among the fund’s successes over the period, Novo Nordisk, thanks to its all-conquering diabetes and obesity businesses.

And the investment managers cite improving consumer confidence and moderating inflation in Europe as reasons why they are cautiously optimistic for the future. What’s more, valuations are cheap. Chair, Rita Dhut notes ‘Europe has truly world class companies attractively valued particularly in relation to the US equity market.’ In other words, the US without the froth.

JPMorgan: ‘JEGI’s relative NAV TR has continued to trend upwards representing an improvement in relative performance since a trough in mid-2020. If we look at the AIC Europe peer group on a rolling five-year basis (to 31/5/24) in NAV TR terms JEGI ranks 4 of 7 but on a rolling three-year basis it ranks 1 of 7 reflecting this improvement. JEGI’s 4% of NAV dividend policy means it has the highest yield of its peer group.’

Winterflood:’JEGI has generated long-term outperformance against the benchmark, testament to the approach, and we view the fund as offering solid core exposure to European equities.’

AVI Global Trust (AGT) focusing on the unfashionable parts
AGT’s+16% share price total return for the half year just missed out on the benchmark’s +16.1% (NAV total return was +13.9%). Decent outcome bearing in mind the Investment Manager’s broad-based approach. This generally sees the fund invest in stocks which, according to Chairman, Graham Kitchen, ‘combine growth prospects with attractive share price valuations’. Because of this, AGT tends to avoid the fashionable parts of the market and instead focuses on the less fashionable areas. One such area is closed-end funds. The Investment Managers have been increasing exposure to the sector over the last 18 months because, in their view, there is ‘a structural lack of interest in such companies, almost entirely for non-fundamental reasons, and we believe this to be an attractive opportunity set with discounts at wide levels’.

Numis: ‘We believe that AVI Global (£1,090m market cap) has an interesting and differentiated mandate. AVI typically focuses on overlooked and under-researched stocks that offer attractive value with a potential catalyst to narrow the discount and works actively to improve corporate governance to unlock value. Further, AGT’s portfolio is trading on c.32% discount, on a look-through basis, and believe that this offers a compelling entry point.’

Biotech Growth Trust’s (BIOG) win-win
BIOG had a good year – NAV per share return came in at +26.5% while the share price total return fared even better at +27.5%. By contrast, the Nasdaq Biotechnology Index (sterling adjusted) couldn’t get into double figures, up just 5% on the year. A tick in the box for the fund’s overweight exposure to small and mid-cap stocks. But, while encouraged by the strong performance, Chair, Roger Yates, acknowledges that ‘there is still some way to go before the Company fully recovers its relative and absolute losses from the past two years.’

Helpfully, Yates thinks there’s more growth to come in the global biotech industry thanks to ‘ground-breaking innovations and new technologies improving and saving lives, creating value for shareholders and, ultimately, driving performance.’

JPMorgan: ‘BIOG has been top of the peer group in share price TR terms. We remain Overweight.’

Winterflood: ‘The managers believe that improved performance has room to run after long drawdown; 15% of US listed Biotech continues to trade at market caps below net cash on balance sheet.’

Edinburgh Worldwide (EWI) taking the long-term view
EWI’s+13.6% share price gain over the latest half year, double the NAV per share return of +6.4%. Neither could match the benchmark’s +15.0% gain however. Chair, Jonathan Simpson-Dent, points out that because the fund invests in companies ‘that are addressing a variety of societal and business problems, utilising innovations and technology to address these challenges’, the portfolio managers’ investment horizon is ‘by necessity, long-term by the standards of the investment management industry’. That long-term focus has worked against EWI this time round, as higher interest rates have hit valuations and put off many private companies from coming to the public markets.

The portfolio managers add that with the mega-caps hogging the limelight, ‘our preferred hunting ground hasn’t had the attention it deserves and has been arguably shunned by many.’ Things might be changing though. If nothing else, because some of the themes have likely been pushed quite far.

Numis: ‘We believe that expectations for rates is likely to continue to be volatile and for sentiment to improve, we believe the portfolio needs to deliver on operational milestones and deliver the growth that the manager is expecting to drive longer time value, independent of interest rates.’

Worldwide Healthcare (WWH) sticking to the plan
WWH’s full-year+12% NAV per share total return, comfortably ahead of the MSCI World Health Care Index’s +10.9% (sterling adjusted). During the year the fund maintained its strategic overweight in biotech stocks, particularly emerging biotech. As at year end, 29% of the portfolio was invested in biotech, 20.7% above the benchmark.

Long-term numbers stack up too. Although the healthcare investor’s +45.8% return over five years is some way off the benchmark’s +68.3%, since the fund’s inception in 1995 to 31 March 2024, NAV per share total return stands at +4,733%. That compares to the benchmark’s +2,438%. And with several tailwinds behind the sector – global demographics, aging populations, persistent demand and continuing innovation – the sector looks to be set fair. No surprise then that the managers are sticking with the long-term investment strategy. If it aint broke, don’t fix it.

Numis: ‘The fund has a solid long-term track record through stock-picking based on fundamental research, and it has typically been less volatile than most of the listed peer group.’

JPMorgan Indian (JII) focusing on quality
JII’s+6.2% total return on net assets fell short of the MSCI India’s +14.7% for the half year. Chairman, Jeremy Whitley, puts the underperformance down to a quality issue. ‘In broad terms this underperformance is attributable to lower quality sectors of the market doing well, whereas your Portfolio Managers have favoured higher quality corporate names, a number of whose share prices have disappointed.’ The Portfolio Managers will however continue to focus on quality, as they believe ‘it will provide greater exposure to India’s growth story and lift performance over time.’

Numis: ‘The shares currently trade on a c.18% discount to NAV, which largely reflects disappointed performance under several iterations of management. That said, we believe there is limited downside given share buybacks and a performance triggered tender for 25% of share capital at NAV less costs.’

Barings Emerging EMEA Opportunities (BEMO) emerging on the other side
BEMO had a strong first half, +13.2% NAV total return easily trumping the benchmark’s +5.8%. Chair, Frances Daley, sounds relieved: ‘After the turmoil of the past two years, it is a pleasure to be able to report positive results’. For turmoil, read the fund having to write down the value of its Russian assets to zero. Looking ahead, Daley highlights how valuations in emerging equities look attractive, particularly when compared to developed markets, so much so that current levels suggest ‘investor expectations for the asset class remain overly depressed.’ This, Daley believes, has the potential to generate ‘increasing interest in the asset class in general and EMEA markets in particular.’

Winterflood: ‘Russian assets in portfolio continue to be valued at zero but Board remains focused on how to preserve, create and realise value from these assets. 3 Russian companies exited during HY (Magnit, X5 and TCS), releasing £2.3m of value back to BEMO.

Foresight Sustainable Forestry receives a cash offer, abrdn Property Income shareholders vote for a new investment policy and Edinburgh cuts its fees. Which fund is on course to maintain AIC Dividend Hero status?

By
Frank Buhagiar
05 Jun

Foresight Sustainable Forestry the next alternative to head for the exit?
Foresight Sustainable Forestry (FSF) has agreed terms with Averon Park whereby Arizona Bidco Limited, a wholly-owned indirect subsidiary of Averon Park, will acquire the entire issued and to be issued ordinary share capital of FSF for 97p cash. That’s a 32.88% premium to the closing FSF share price of 73p on 28 May 2024, a 43.28% premium to the volume weighted average price of 67.7p per share for the three-month period ended 28 May 2024 and a 5.09% discount to FSF’s unaudited NAV per share as at 31 March 2024.

There is an alternative to the cash offer – qualifying shareholders can opt to receive one unlisted B ordinary share in the capital of the Bidco for each FSF Share. According to Averon’s press release, it has received commitments and indications of support for the deal representing, in aggregate, approximately 26.88% of FSF. Add that to the 29.64% Averon already owns and looks like FSF is on its way out.

Jefferies: ‘Despite the connected nature of the bidder (already owning 29.6% of the shares as Blackmead), we see this as a fair offer for the remaining shares given the narrow discount to NAV of 5%, the stable underlying portfolio valuation, and the sub-scale nature of the company.’

abrdn Property Income shareholders choose to wind down
abrdn Property Income (API) shareholders voted overwhelmingly in favour of the proposed New Investment Policy – to implement a managed wind-down. at the 28 May 2024 General Meeting.

In terms of timings, according to the accompanying announcement, the process of realising the company’s assets and returning the proceeds to shareholders is expected to take around 18-36 months. So, expect API to be around for a while yet. Be interesting to see if jilted suitors Urban Logistics (SHED) and Custodian Property Income REIT (CREI) pick up a few of API’s assets though.

Edinburgh cuts its fees
Edinburgh (EDIN) unveiled an 11% cut in fees. As announced in the recent Finals, a new lower fee scale has been agreed with the manager: 0.45% per annum on the first £500m market capitalisation; 0.40% per annum on the next £500m; and 0.35% on the remaining balance. Based on the year-end market capitalisation, that works out at an 11% pro-forma management fee cut.

Dividend Watch
CT UK Capital Equity & Income (CTUK) on course to maintain AIC Dividend Hero status. That’s because, as announced in the company’s interims, the 5.70p half-year dividend represents a 3.6% increase compared to a year earlier. Not only does this generate a yield of 3.9% but puts the fund on track to maintain its record of raising the dividend every year since launch in 1992 and in the process its AIC Dividend Hero status.

Finsbury Growth & Income (FGT) ups its interim dividend. As announced alongside the Half-year Report, the first interim dividend of 8.8p per share represents a 3.5% increase on 2023’s 8.5p.

You need to save a certain amount on a certain date, u can currently save in a tax free ISA but are worried that as interest falls you will not achieve your target.

Example. For a special reason u want 10k at the start of 2028

Which u need on a certain date, with no ifs and buts.

Example u want 10k at the start of 2028.

Government gilts, spread 0.7%.

KEY INFORMATION

ISINGB00BMBL1G81TIDMTN28 ExchangeLSE
ParValue£100 Maturity Date 31/1/2028
Coupons per year 2
Next coupon date 31/7/24 Coupon 0.125%Income

Yield 0.14%Gross

Redemption yield 4.12%
Accrued interest 4.36p
Dirty Price£86.63

Currently £87.77 to buy. Cost to buy £8,777 plus your dealing cost at AJ Bell £4.95. U have to leave an order but most orders are filled straightaway.

Income is negligible and there are no capital gains to pay if held outside a tax wrapper. On the 31/01/28 the government will return to u 10k.

Currently £87.77 to buy. Cost to buy £8,777 plus your dealing cost at AJ Bell £4.95. U have to leave an order but most orders are filled straightaway.

Income is negligible and there are no capital gains to pay if held outside a tax wrapper. On the 31/01/28 the government will return to u 10k

Ian Cowie: bargains for the brave or funds for fools?
Our columnist examines an area offering high yields. However, over the past year and five years this has, in some cases, come at the cost of lower total returns.

6th June 2024

by Ian Cowie from interactive investor

Critics of investment trusts claim that double-digit discounts to net asset values (NAVs) are illusory if nothing happens to lift share prices back into line with NAVs. Now, a £434 million commercial property investment trust, where I reported buying shares here last month, has seen its price jump by 11% in one day on bid speculation.

Some illusions seem to be more powerful than others. The warehouse specialist, Tritax EuroBox Euro Ord

EBOX is the sterling currency version) surged to just short of its annual high when Brookfield Asset Management Ltd Ordinary Shares – Class A
BAM confirmed it is considering a bid.

The Canadian fund manager, which claims to have US $725 billion (£569 billion) under management, said it is in the early stages of assessing a possible cash offer for the entire share capital of EBOX. However, that £434 million stock market capitalisation remains -26% below this investment trust’s NAV – which is in line with the average for its sector. So, I believe there might be further to go for both EBOX and other undervalued commercial property investment trusts.

Either way, shareholders are being paid to be patient with dividend income of 7.2%. Not that we should have to wait too long before news, one way or another, because BAM is now required by takeover rules to either announce a firm intention to make an offer for EBOX or admit that it does not intend to make an offer before close of business on 1 July.

Here and now, bid activity adds urgency to considering income and growth opportunities in the heavily discounted commercial property sectors of Britain and Continental Europe. Whatever cynics may say about the lack of catalysts for recovery, you can still buy £1 worth of many warehouses, office blocks or shopping malls for less than 75p or less.

For example, even greater dividend yields and discounts – of 9.1% and -39% respectively – can be obtained from Schroder European Real Estate Inv Trust
SERE
This £199 million investment trust owns a variety of commercial properties in Paris, Berlin, Hamburg and Frankfurt.

Sad to say, the price of a higher income has been lower total returns because SERE has shrunk shareholders’ capital by -12% and -20% over the last five-year and one-year periods respectively. For comparison, EBOX’s total returns over the same periods are -12% and plus 13% respectively. Neither of these Continental European property trusts has a decade-long record.

Decent dividends with higher total returns and deeply discounted prices can be found closer to home in UK Commercial Property. For example, abrdn Property Income Trust Ord
API

currently yields 7.6% income but remains priced -31% below its NAV, despite leading its sector over the last year with a total return of 9.2%.

API’s five and 10-year track record offers a partial explanation by illustrating the cyclical volatility of this sector. Over the shorter period, its total return is -23% while, over the longer term, it is positive by the same amount.

Balanced Commercial Property Ord
BCPT

ranks second over the last year after similar switchbacks over the long, medium and short terms. Is a current dividend yield of 6.6% sufficient to justify total returns over the last decade, five years and one-year periods of plus 6.4%, minus 14% and plus 6.6%? BCPT’s -26% share price discount to NAV suggests that for many folk the answer is “no”.

Part of the problem with API and BCPT is that neither has consistently delivered rising dividends. Both have shrunk shareholders’ income over the last five years; by annual averages of -3.4% and -3.3% respectively.

Top 10 most-popular investment trusts: May 2024
The top 10 most-popular investment funds: May 2024
Investors piling into US funds, but are they joining the party too late?
More positively, real estate income trust Alternative Income REIT Ord
AIRE

currently yields 8.8% income, despite raising dividends by an annual average of more than 13% over the last five years. It is important to beware that dividends are not guaranteed, because they can be cut or cancelled without notice, but if that rate of ascent is sustained it would double shareholders’ income in less than five years and six months.

AIRE’s 18 underlying properties are spread across diverse sectors including “automotive and petroleum, education, healthcare, hotels and industrials”. Its total return over the last year is a modest 5.5%, but it also remained positive over the last five years with a total return of 22% although it lacks a 10-year record. Its discount is -16.5%.

All the above investment trusts have survived setbacks for this sector – ranging from rising interest rates and online shopping to Covid collapsing demand for offices and technology boosting working from home. Commercial property investment trusts have demonstrated that closed-end funds are a much better way to gain exposure to illiquid assets than their open-ended rivals, which former Bank of England governor Mark Carney memorably described as being “built on a lie”.

Looking forward, it remains to be seen whether the dividend yields and discounts currently available in this sector will prove to be bargains for the brave…or funds for fools.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.