Discount Watch

We estimate there to be six Investment Trusts trading at 52-week high discounts with three new names making it into the latest Discount Watch.

ByFrank Buhagiar •01 Jul,

We estimate there to be six investment companies trading at 12-month high discounts over the course of the week ended Friday 28 June 2024 – the same number as the previous week.

Next new name to mention, The Renewables Infrastructure Group (TRIG). No news out this past month apart from Company announcements detailing fractional movements in wealth manager Brewin Dolphin’s interest in the fund. Not much to write home about there. And not much in the way of press coverage either. Something of a mystery then as to why the shares are trading at a year-high discount to net assets. Does Mr Market know something the rest of us don’t? One to keep an eye on.

There are a couple of of new names we’d like to highlight, or in the case of Downing Strategic Micro-cap (DSM), a reappearing name. DSM, which is in wind-down mode, last appeared on the Discount Watch List on 10 June 2024. It subsequently disappeared from the list only to find itself among Winterflood’s top-five monthly movers. The sharp turnaround in fortunes was due to the announcement of a managed wind-down.

On 18 June 2024, DSM announced a third special interim dividend of 17.5 pence per share, equivalent to, in aggregate, £8.0 million. Fast forward to 27 June and DSM shares went ex-dividend. That means those who buy the shares now will no longer be eligible for that special dividend. To reflect this, the share price dropped by the amount of the dividend to be paid. The dividend is due to be paid on 18 July so net assets haven’t yet been adjusted downwards. Share price down + net assets unchanged = shares back on the Discount Watch. Question is, will DSM’s shares muscle their way back into Winterflood’s top-five movers once the dividend is paid in July?

Finally, Henderson High Income (HHI). Only new news out, the latest monthly factsheet on 21 June 2024 showing a NAV total return of +2.7% for May compared to the composite benchmark’s (80% FTSE All-Share Index/20% ICE BofA Sterling Non-Gilts Index) total return of +2.1%. Imagine what the shares would have done if the fund had underperformed the index.

The top-five discounters Fund Discount Sector

Ground Rents Income GRIO -70.60% Property

Ceiba Investments CBA -69.64% Property

Downing Strategic Microcap DSM -69.40% UK Smaller

The Renewables Infrastructure Group TRIG -26.08% Renewables

Henderson High Income HHI -11.08% UK Equity & Bond Income

The full list

Fund Discount Sector

Ceiba Investments CBA -69.64% Property

Ground Rents Income GRIO -70.60% Property

Renewables Infrastructure Group TRIG -26.08% Renewables

Diverse Inc DIVI -10.91% UK Equity Income

Henderson High Income HHI -11.08% UK Equity & Bond Income

Downing Strategic Microcap DSM -69.40% UK Smaller

Warren Buffett at a Berkshire Hathaway AGM Provided by The Motley Fool

How to earn passive income using the Warren Buffett method
Story by Stephen Wright

Investing like Warren Buffett involves two things. The first is buying shares in great companies at decent prices and the second is being patient and allowing the investments to develop.

Coca-Cola shares

Berkshire Hathway has owned its stake in Coca-Cola since 1994. At the time, the dividend yield was around 5.75% and Buffett’s company received around $75m in the first year.

That’s not bad, but over the last three decades, the investment has grown into something spectacular. Last year, Berkshire received $704m – a return of 54% on the initial outlay. 

From a passive income perspective, that’s a spectacular result. And it comes down to two things that are central to the Warren Buffett approach to investing – finding great businesses and being patient.

Finding great businesses

In Buffett’s words: “If a business does well, the stock eventually follows.” The mean reason Berkshire’s investment in Coca-Cola has worked so well is because the business has two important characteristics. 

Second, the firm has a has a significant advantage over its competitors. Its powerful brands and wide distribution network allows it to bring products to market better than its rivals.

Don’t be in a rush

The other part of Buffett’s approach is being willing to wait for opportunities. As he puts it: “The stock market is a device for transferring money from the impatient to the patient.”

If Berkshire had paid twice as much for its stake in Coca-Cola back in 1994, the dividends it receives today would be 27% of the initial outlay, not 54%. That’s still impressive, but not nearly as good.

Being patient also means being willing to hold investments for the long term. On average, Coca-Cola’s dividend has only grown by 8% per year – but over 29 years, that becomes something really significant. 

8.7% yield. A dividend growth stock to consider stashing in a SIPP for decades

I’m looking for the best dividend growth stocks for SIPP investors to consider today. Here’s one with an 8.7% yield that deserves close attention.

Royston Wild

AGR

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.

Investing in UK shares can be an effective way to source a large and growing passive income. The FTSE 100 and FTSE 250 in particular are home to stacks of top dividend growth stocks.

These indexes are packed with established businesses that have market leading positions and robust business models, giving them stable earnings and strong cash flow. This is the perfect recipe for them to deliver a dependable (and often growing) dividend over time.

A top SIPP buy

Remember that dividends are never, ever guaranteed. Indeed, they can fall, or even be suspended altogether, when broader economic conditions worsen.

However, a well diversified portfolio — one which provides exposure to different companies across multiple sectors and geographies — can still generate a rising passive income year after year.

But which UK shares are the best ones to buy for dividend growth today? Here, I’ve identified one that could be a great long-term buy for those who own a Self-Invested Personal Pension (SIPP).

REITs rule

Real estate investment trusts (REITs) can be some of the most secure dividend stocks out there. The regular rents they receive often provide a dependable income that they can distribute to their shareholders.

In fact, these special property stocks are required to pay 90% of annual rental earnings (profits) by way of dividends. While other shares can choose whether or not to pay dividends, REITS simply have no choice if their rental operations are profitable.

Assura (LSE:AGR) is one such share with a strong history of dividend growth. It’s raised annual payouts for the last 11 years on the spin. Over the past nine years, dividends have risen at a healthy compound average of 7% too.

Robust earnings

There are around 50 REITs listed on the London Stock Exchange today. But I like this one because its operations can be considered particularly defensive. As mentioned above, stable earnings usually translate to regular — and in this case, growing dividends.

You see, Assura owns, manages, and leases out medical centres across the UK. More specifically, it owns more than 600 GP surgeries, diagnostics centres and primary healthcare facilities.

Needless to say, these properties remain in high demand at all points of the economic cycle. So in this regard, Assura doesn’t have to worry about empty buildings and problematic rent collection during downturns.

Furthermore, the majority of rents that doctors, NHS bodies and other healthcare providers pay the company are indirectly funded by the government. This, in turn, reduces the possibility of rent defaults.

8.7% dividend yield

Of course no share is without risk. In the case of Assura, changes to NHS policy could significantly alter its long-term growth prospects.

But as things stand today, it’s looking good. Demand for primary healthcare facilities is growing as the government tries to ease the strain on packed hospitals. It is likely to continue expanding too, as Britain’s elderly population swells.

City analysts are expecting Assura’s dividends to continue growing for the next three years, at least. This means its dividend yield stands at a whopping 8.4%, and eventually rises as high as 8.7%.

If I didn’t already own shares in industry peer Primary Health Properties, I’d buy Assura shares to boost my long-term passive income.