Investment Trust Dividends
Not naval gazing !!
With the cash return from ADIG the blog portfolio should have around 6k for re-investment next month.
That should produce income of around £540.00 when re-invested, less a reduced dividend from ADIG of £240.00.
An addition to the Snowball of £300 a year for ever.
GRS
The blog is in an accumulation phase, so Investment Trusts that will be favoured are those that pay a secure yield, nothing is a hundred percent secure.
In an accumulation phase if u buy Investment Trusts that pay a dividend and trade at a discount, when/if the discount narrows u should make a capital gain to re-invest in another higher yielder. The current blended portfolio discount is 33%, remember this is a Brucie bonus and not the reason to buy.
A staple of Saturday evening entertainment for decades, many of his one-liners have passed into the public lexicon years after.
De-accumulation.
When u need to spend your dividends rather than re-invest them, hopefully u will have built up the dividend stream to have a surplus to re-invest but that is a topic for another day.
U need your dividends to pay your living xpenses, so income is more important than the chance to make a capital gain, so one ETF that could be of interest
Global X ETFs ICAV – Global X Superdividend UCITS ETF
An ETF, so it will trade around its current NAV, the yield is 11% but pays a monthly dividend, similar to SMIF
For DYOR google SDIP SMIF
Now it’s unlikely u will make a capital gain, possible but u are more likely to lose some capital. U need to compare to
‘If u took out an annuity where u would lose all your capital and a smaller pay day but at a lower risk’.
Story by Dr. James Fox
The Motley Fool
Millions of us invest for a passive income. And while reaching our goals may appear daunting, with consistency, patience, and intelligent stock picking, it’s more than possible.
Work the ISA
The Stocks and Shares ISA is a hugely important vehicle for our investments, allowing us to grow our wealth in a tax-efficient manner.
The key benefit is that any income or capital gains earned within the ISA are exempt from UK income tax and capital gains tax.
This means that all dividends, interest, and profits generated from investments are completely tax-free, enabling us to maximise our returns.
And if I were to invest £1,000 monthly, it’d certainly make sense to use the Stocks and Shares ISA, which has an annual allowance of £20,000.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
Compounding for glory
£1,000 a month adds up quickly, but our portfolio grows even faster when we compound our investments. This means we reinvest our returns every year.
It might not sound ground breaking, but the impact’s huge. It’s like the snowball effect, with an ever-increasing pot of money gaining pace year after year.
For context, assuming £1,000 of monthly contributions and a 10% return, it’d take me a little over six years to reach my first £100k. But it’d take just four years for my portfolio to grow from £100k to £200k. Then the next £100k jump would take just three years. After 21 years, my portfolio would be growing by £100k a year.
Using this example, it’d take me 22.5 years to reach £1m. That’s enough to generate at least £60,000 annually, referencing current dividend yields available on the FTSE 100.
Harvey Jones says investing regular sums in a Stocks and Shares ISA is a brilliant way of building up a tax-free passive income stream over time.
Harvey Jones
MotleyFool
Published 21 June
When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.
My favourite way to use the £20,000 ISA allowance is to invest in a spread of UK stocks that will pay me a high and rising passive income.
London’s FTSE 100 index is home to some of the most generous dividend payers in the world. The average yield is 3.7%, but I can get double or even triple that, by targeting individual companies.
I’d start by opening a Stocks and Shares ISA account with a reputable broker. Then I’d work out how much I could afford to pay in. Most people can’t afford to max out their ISA allowance every year, and sadly, I’m one of them.
Let’s say I started with no savings and invested £300 a month. After a year, I’d have put away £3,600 a month. That’s a pretty tidy start.
Now let’s say I increased my contribution by 5%, year after year. After 30 years, I’d have paid in £394,534.
Then let’s say my portfolio grew at 7% a year, which is the average long-term return on the FTSE 100.After 30 years, I’d have £633,714. That’s a pretty staggering sum. And as it’s inside an ISA, I wouldn’t have to hand a penny of it to HMRC. I’d keep 100% of the money.
Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
I wouldn’t put all my money into one stock, but invest in a spread of FTSE 100 companies. In time, I’d aim to hold 15 to 20 different shares.
I’m tempted by oil and gas giant BP (LSE: BP). It’s been a FTSE 100 stalwart for as long as I can remember but no company has everything its own way. The BP share price tends to rise and fall with the oil price. As with all cyclical stocks, I prefer to buy when they’re down rather than up.
That’s handy, because BP shares have fallen 5.36% in the last three months, and are up just 1.58% over the year.
They could fall further, of course. The world is trying to wean itself off oil. While BP is investing more in renewables, it’s a long way from giving up on fossil fuels. Searching for oil is hazardous, and accidents can happen, as BP knows better than most.
Yet the shares look cheap trading at just 6.7 times earnings. They’re forecast to yield 5.16% in 2024, covered 2.3 times by earnings. Markets expect the yield to hit 5.47% in 2025. Although, dividends are never guaranteed.
By investing in a spread of high yielders like this, I think I could generate an average long-term yield of 6% a year, and possibly more.
At that rate, my £633,714 portfolio would pay me a second income of £38,023 a year. That’s without drawing any capital. My calculations are theoretical but point to an important underlying truth. Investing in a Stocks and Shares ISA is a brilliant way of building capital and passive income over the longer term. Entirely free of tax.
We are pleased to have met our stated target dividend of 7.57 pence per share for the year, up 6% compared to the prior year and still well covered by net cash flows from the Company’s diversified portfolio. Despite the difficult operating environment, future cash flows remain robust with comfort provided from near-term fixes, such that the Board has set a dividend target of 7.80 pence per share for the current year, an increase of 3%. This will be paid in quarterly instalments as usual.
Jack Carter takes over to explain Why dividend stocks are more important now than ever before. — The Dividend Wealth Journal Team |
Shires Income
Disclaimer
This is a non-independent marketing communication commissioned by abrdn. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.
Overview
SHRS’s differentiated approach to income offers a high and resilient yield, coupled with the potential for growth…
Overview
Shires Income (SHRS) is an income-focussed product led by managers Iain Pyle and Charles Luke, who strive to deliver a higher income than the market, together with the potential for income and capital growth. They invest primarily in UK equities, targeting companies they deem to be high quality because, in their view, these businesses tend to produce more resilient earnings streams with fewer tail risks. Additionally, the managers will invest overseas for opportunities that underpin their pursuit of delivering a high and growing income, as well as bolstering the resilience of the portfolio’s income streams, including Mercedes-Benz, which they invested in recently (see Portfolio). The board is seeking shareholder approval to raise the limit on overseas stocks to 20% from the current 10%, in order to allow the managers greater flexibility to achieve their objectives.
One distinguishing feature of SHRS is the managers’ decision to allocate around 20% of the portfolio to preference shares (see Dividend). With an average a yield of 7.5%, these shares do a lot of heavy lifting on the dividend, affording the managers greater flexibility to explore parts of the market less common in traditional equity income portfolios. This includes small- and mid-caps, which sometimes exhibit lower starting yields but offer greater dividend growth potential. This is an area of the market where the managers are finding increasing value, amidst attractive valuations, and have added several stocks, including Kier Group. Moreover, following the combination of SHRS with abrdn Smaller Companies Income Trust plc (aSCI) in December 2023, the managers’ direct exposure to small- and mid-caps has increased. Out of aSCI’s portfolio of 50 to 60 stocks, eight were carried over to SHRS post-combination, including 4Imprint, Hunting and Hollywood Bowl.
At the time of writing, SHRS is trading at a Discount of 9.6%, much wider than its five-year average of 4.2% and the AIC sector average of 5.9%.
Last year’s fully covered dividends give an historic yield of 6.0%, with the final dividend for the 2024 financial year of 4.8p bringing the total payout to 14.4p, an increase on the previous years’ dividend of 1.4%.
Analyst’s View
We believe SHRS is positioned well to deliver on its objectives of a high and growing income, alongside capital growth. The managers seek to diversify the underlying income streams utilising a mixture of investments in high-quality UK businesses, overseas opportunities the UK market may be lacking and an allocation to preference shares (see Portfolio).
In our view, the allocation to preference shares means the managers are less constrained from an income perspective and have greater flexibility to explore beyond traditional high-income UK investments. This approach allows them to consider businesses with lower initial yields but greater potential for dividend growth, offering something different versus many in the peer group. Balancing these types of companies has helped SHRS retain a yield premium to the market, enhance its income diversification and dividend growth potential, as well as bolstered its resilience during periods of market stress.
Despite facing increased competition from the high interest rates that investors can earn on cash over the last few years, the managers’ differentiated approach to income has buoyed SHRS’s Dividend yield, which at 6.0% remains attractive versus cash. We also think that the managers’ focus on high-quality companies, overseas exposure and allocation to preference shares provides investors both growth potential and protection against inflation that are often lacking with cash. Additionally, the fact that SHRS is currently trading at an abnormally wide Discount could present a potentially appealing entry point for investors. A rebound in Performance and strengthening investor sentiment towards UK equities could see it narrow quickly, providing an additional boost to returns.
Bull
Successful combination with aSCI has reduced costs, increased net assets and led to more focussed exposure to small-caps
Offers one of the highest yields in the sector and a premium to the market, supported by a range of income streams and strong reserves
Discount exceeds its own five-year and peer group average, which provides an attractive entry point for new investors
The managers also argue that the 20% allocation to preference shares offers meaningful differentiation without excessively limiting equity-like returns. Consequently, this allocation tends to seldom experience significant shifts. However, if opportune, the managers are open to adjustments, as evidenced by their actions over the last 12 months, where they added in extra Standard Chartered and Lloyds preference shares at yields ranging from 6% to 7%.
The final dividend for the 2024 financial year of 4.8p brings the total payout to 14.4p, representing a yield of 6.0% at the time of writing. This represents a premium to both the AIC UK Equity Income sector’s weighted average yield of 4.2% and FTSE All-Share’s yield of 3.6%. The decision to reduce the percentage of management and finance costs allocated to income from 50% to 40%, as of the 2024 financial year, will help buttress the high-income potential of the shares.
Dividends were fully covered by revenue earnings of 14.75p, essentially flat on 2023’s 14.83p. While the income from the portfolio grew, the aSCI transaction increased the share count, and the timing of the transaction meant that many of the latter’s holdings had already paid their dividends. SHRS pays three equal dividends followed by a larger, final dividend.
On a rather dry, technical note, the board is proposing to cancel the Share Premium Account, which stems from the combination with aSCI, to make this account fully distributable by way of dividend or buyback. While there is no intention to pay dividends out of it, the board argues that the flexibility is in shareholders’ interests. There is already a substantial realised capital reserve which can be used to supplement revenue reserves (0.69 times the 2024 dividends). As such, we think investors can have high confidence in the sustainability of SHRS’s dividends.
Bear
Exposure to small- and medium-sized companies may bring more sensitivity to the UK economy
Funding preference share allocation through gearing may result in lower capital growth when markets rally
Out of favour home market and exposure to domestically sensitive stocks could weigh on the disco
3i and the power of markets.
Gains are unlimited but losses are limited to 100%, if u don’t add to a losing position.
Have u got a portfolio maker in your portfolio ? only time will tell but u only need one.
U may not be lucky, so it may be prudent to invest in dividend paying Trusts, just in case u are not so lucky. To be sure, to be sure. GL
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