abrdn Equity Income Trust PLC ex-dividend payment date Alliance Trust PLC ex-dividend payment date Bluefield Solar Income Fund Ltd ex-dividend payment date Canadian General Investments Ltd ex-dividend payment date Downing Renewables & Infrastructure Trust PLC ex-dividend payment date Henderson Smaller Cos Investment Trust PLC ex-dividend payment date JPMorgan American Investment Trust PLC ex-dividend payment date JPMorgan Global Growth & Income PLC ex-dividend payment date LondonMetric Property PLC ex-dividend payment date Premier Miton Global Renewables Trust PLC ex-dividend payment date
The current estimate for quarterly income is £2,239.
There is approx £3,339 of dividends to be earned this year and if re-invested at 8% that would equal £267 of extra income.
£2,239 plus £267 = £2,506 of income x 4 = income of £10,024.00 (2025)
This is not a fcast or a target, yet, as several dividends are still to be declared.
I intend to re-invest in the portfolio so each of the underlying Trusts return very approx £250 a quarter, which will mean some positions will be overweight but monitoring the portfolio performance will be much simpler.
Hopefully as these dividends are re-invested and the current dividends gently increase the figure could be bettered or if a dividend is cut the figure could be less. The glorious uncertainty of investing.
Once income of 10k is secured, it may be necessary to open a new position but not a decision for the foreseeable future.
London-listed REITs had a tough first half of the year, but one company bucked the trend – London Metric Property shares are not only in positive territory year to date but even managed to gain promotion to the FTSE 100. Calls for a Deep Dive into the REIT to see if there are any pointers for the rest of the sector.
By Frank Buhagiar
In June 2024, LondonMetric Property (LMP) gained promotion to the FTSE 100. Some achievement, not just because the company was founded barely a decade ago in 2013, but also because the property sector as a whole has not been having the easiest of times lately.
Higher interest rates have made debt expensive; the elevated yields offered by risk-free assets, such as bonds and cash, have made it harder for property companies to compete for the investor’s pound; the working-from-home phenomenon has disrupted the office subsector; increased demand from occupiers for properties with the highest green credentials has raised the risk of older vintage assets becoming obsolete – just some of the factors that have weighed on the property sector in recent years. So much so that, according to CBRE, May 2024’s +0.2% capital value increase was the first positive movement seen across the UK commercial property sector since April 2023.
Against this backdrop, London’s REITs had a tough first half of the year. According to broker Winterflood, the FTSE EPRA NAREIT UK Index was down -2.4% in total return terms for the six months to 30 June 2024, some way off the FTSE All Share’s +7.4%. In all, 23 out of 29 investment companies in the sector generated negative share price returns over H1 2024. No surprise then that, over the Jan-Jun 2024 period, 22 out of 29 funds (84% of the sector’s market cap) were de-rated. No surprise either that the share prices of all investment companies in the property space were trading at discounts to NAV. And, as the graphic below from Winterflood shows, the same was true at the individual sub-sector level:
And yet, LondonMetric bucked the trend. Year to date, LMP’s share price is up around +6%, helping its shares to gain FTSE 100 promotion. So, what’s the secret of LMP’s success and are there any pointers for the rest of the sector?
Calls for a review of LMP’s latest full-year results which were released in June. Highlights include a total property return of +4.7%, some 570 basis points more than the IPD Index. This was primarily driven by ERV (Estimated Rental Value) growth of +5.7%. Outperformance, a good start.
And then there’s the first bullet point of the results announcement that neatly encapsulates the story: “Focus on winning sectors and transformational M&A drives rents, earnings and dividend growth”.
For winning sectors read the “structurally supported sectors of logistics, convenience, healthcare and entertainment”. Take logistics. The sector currently accounts for 43% of the portfolio but is expected to rise to over 50% over the next year – structural drivers here include the rise of e-commerce as well as supply-chain reconfiguration in favour of just-in-case strategies that have been increasingly in demand since the pandemic. Being in structurally supported sectors leads to strong fundamentals such as high occupancy rates (99.4%) and robust demand from occupiers. High occupancy rates and robust demand result in higher rents – rent reviews during the year resulted in a +19% increase in rents on a five-yearly equivalent basis; urban logistics saw an even more impressive +40% rental uplift. Higher rents drive positive financials.
For transformational M&A, read this year’s merger with LXi REIT which added £2.9 billion of assets and also the takeover of CT Property Trust which added another £0.3 billion. The merger activity saw the value of LMP’s portfolio double to £6.0 billion (31 March 2023: £3.0bn), while net contracted rent more than doubled to £340 million from £145 million previously.
No wonder CEO, Andrew Jones, describes the year as a transformational period for the Company which has seen the creation of the UK’s leading triple net lease REIT and the third largest UK REIT by market capitalisation according to Jones. “Scale and income granularity are increasingly important and our activity has further enhanced our sector leading income metrics with reliable, predictable and exceptional income growth.”
One reason why scale is becoming increasingly important is because wealth managers, historically important buyers of investment companies, are becoming larger. Last year, for example, saw the merger between Rathbones and Investec which created a manager with £100 billion of assets under management. As Winterflood explains in its January 2024 annual review, this led to some concerns that there could be forced selling, or at least subdued future demand. “If the merger (of Rathbones and Investec) led to the combined entity owning more than 30% of a fund’s shares (the threshold that would normally require a bid to be made under Takeover Panel rules).” So far, these concerns have failed to materialise but the broker expects an increased focus on larger, more liquid investment trusts from these groups, particularly “those with centralised investment propositions, and additional scrutiny on the relevance of sub-scale funds.”
Thanks to the above M&A activity, LMP appears to have responded to the changing market dynamic quicker than most. The title of a March 2024 note on LMP by JPMorgan neatly sums it up, “Bigger is better”. In the note, the broker uses the completion of the all-share merger with LXi to reinstate coverage of LMP with an overweight rating. According to JPMorgan the merger enhances the defensive characteristics and income security of LMP’s portfolio by diversifying across a broad range of resilient sectors (such as Entertainment and Healthcare) with high barriers to entry, strong underlying property fundamentals and attractive and sustainable rent income growth prospects – with a growing dividend target.
JPMorgan goes on to highlight a further benefit of the LXi acquisition – enhanced liquidity. “An impediment in real estate for investors when we go marketing has been liquidity. We note there has been a significant increase in share liquidity post-merger – the average trading volume for LMP for the last five days has been £11m, 2.7x higher than its average trading volume for the last 12 months.”
The Investors Chronicle is also a fan of the stock. In LondonMetric Property growing in moribund Reit market, the IC believes LMP’s results show initial promise as the company digests the £1.9bn merger with LXi. “However, there is still plenty of housekeeping to do before the company takes final shape.” Housekeeping involves selling off non-core assets such as the sale of Scottish offices for £37m that LMP announced alongside the results. At the time of the results, a further £107m of disposals were in the due diligence phase. The proceeds of the various sales have been earmarked to pay down debt or pursue new opportunities.
Quick note on valuation. The IC acknowledges that being “On a forward price/earnings (PE) of 15 times Peel Hunt’s forecasts for 2025, with only a narrow discount to net asset value (NAV) expected, LMP is not a cheap proposition”. However, “it is a growth company in an otherwise moribund Reit market. Buy.” Growth, another sought after quality.
Scale, liquidity, growth, M&A, outperformance, sectors – all would feature strongly in a word cloud on the LMP investment case. All it would seem are key takeaways for London’s REIT space today.
Of course, LMP, not the only fund to hit the acquisition trail – Tritax Big Box’s (BBOX) acquisition of UK Commercial Property for example, but LMP’s promotion to the FTSE 100 does make it a model for others to follow. Time will tell if other REITs do go down the LMP path. For now at least, there’s one REIT that may well look to capitalise on the still wide discounts on offer and snap up a sub-scale fund or two, LMP itself. After all, the £4 billion market cap does have form.
The Results Round-Up – The Week’s Investment Trust Results
Diverse Income’s track record of delivery remains intact; Temple Bar’s value investing approach continues to pay off; Riverstone Energy hedges its bets by staying balanced; Baillie Gifford US Growth reveals a key quality of a successful investment; while it’s been all go at The Partners Group Private Equity.
By Frank Buhagiar•23 Aug
Diverse Income (DIVI) and Flat Tyres
DIVI’s+15.4% adjusted NAV total return for the year pretty much in line with the Deutsche Numis All-Share’s +15.6%. That means DIVI’s track record of outperformance remains intact – from launch in April 2011 to 31 May 2024, adjusted NAV total return was +219.9% compared to the index’s +119.0%. As the name suggests, income, a key aim and, here too, DIVI has delivered – 4.25p per share was paid out in dividends, an increase on the previous year’s 4.05p. As a result, “The Trust has maintained an unbroken good and growing dividend record.” Despite this, the fund’s annual voluntary redemption opportunity saw a big uptake from shareholders: +25.8% of the total equity was offered for redemption. Because of this, a redemption pool was established for redeeming shareholders.
Chairman, Andrew Bell, believes there is underlying value on offer, particularly “if both substance and perceptions of the UK economy sustainably improve”. Bell goes on to point out, however, that “Nobody rings a bell at the market top but nor do they sound the gong at the low point. So, this is not a forecast of better times but an observation that a bad attitude is like a flat tyre – you cannot go anywhere until you change it, and it is hard to dispute that UK investors have been pessimistic in recent years.” Encouragingly, based on the UK stock market’s recent improved performance after a prolonged de-rating, particularly for small caps, Bell notes the Manager is “more upbeat.” Perhaps, the flat tyre has already been changed, although no one told the market as the shares were largely, well, flat on the day of the results.
JPMorgan: “DIVI trades at a wider than average discount vs the AIC UK Equity Income peer group but in line with the average discount for the AIC UK Smaller Companies peer group suggesting the size focus of the portfolio is part of what drives the rating. We remain Neutral.”
Temple Bar (TMPL), Raising the Bar
TMPL’s +13.1% NAV per share total return almost double the FTSE All-Share’s +7.4% for the half year. Chairman, Richard Wyatt, believes the strong showing is down to stock selection as well as a favourable market backdrop for the investment manager’s “value investing approach.” The strong half-year performance, no one-off either: over one- and three-years NAV per share/shareholder total returns stand at +22.9%/+33.9% and +21.8%/+36.7% respectively – all comfortably above the FTSE All-Share’s +13.0%/+23.9%.
The investment managers think there could be more to come as they believe the fund’s portfolio of stocks continues to look very undervalued. As for how undervalued, look no further than the aggregate valuation of TMPL’s portfolio which stands at around just 8x this year’s expected earnings. That low valuation, perhaps justifiable if you take a dim view of UK economic prospects. But the managers point out that “it is important to remember that we buy companies and not economies. The companies in which the Trust is invested mostly generate the majority of their profits from overseas and are sound, conservatively run businesses with good balance sheets and capable management teams.” Market liked what it heard – shares ticked up a tad higher on results day.
Winterflood: “Managers expect UK market returns to continue to be driven by M&A activity and companies buying back their own shares. They think the TMPL portfolio continues to look ‘very undervalued’.”
Riverstone Energy (RSE), Staying Balanced
RSE’s conventional energy investments stood out in the latest half-year period. Along with a US$200 million tender, they contributed positively towards a +6% NAV per share increase for the period. Chairman, Richard Horlick, believes conventional assets “are benefiting from the broad recognition that the transition to renewable energy will require an integrated approach, using conventional fuels as well as renewables to avoid overexposure to any one source of energy and ensure consistency of supply. This means conventional energy still holds, and will continue to hold, substantial value for some time yet.”
Not that RSE is putting all its eggs in the fossil fuel basket. It also holds a decarbonisation and energy transition portfolio, although this segment “has been more exposed to valuation pressures and macroeconomic impacts.” The investment managers, however, remain “committed to maintaining a balanced portfolio, combining value-generative investments in conventional energy with growth investments in decarbonisation and transition assets, where long-term trends offer significant opportunities.” Portfolio not the only thing balanced. So too, sellers and buyers of the fund – shares were unchanged following the numbers.
JPMorgan: “Taking out the cash and listed holdings at NAV implies a discount of 125% on the remaining unlisted holdings. Although high portfolio concentration represents a risk, the implied discount on the unlisted assets seems hard to justify in fundamental terms. We are Overweight.”
Numis: “The majority of the portfolio is in conventional energy assets, 63% of net assets, and an active M&A environment is promising for potential realisation events which will be key to crystallising value from the shares. We estimate a NAV adjusted for listeds and currency to be $16.18/£12.97, leaving the shares on a c.36% discount, which we believe offers significant value. The implied discount widens further to c.43%, when excluding cash of $94m (c.22% of net assets).”
Baillie Gifford US Growth (USA) on What Makes a Successful Investment
USA’s +32.9% share price return for the year comfortably ahead of the S&P 500’s +24.8% (sterling terms), although NAV was a more pedestrian +16.2%. The investment managers highlight improving financial metrics across the portfolio companies: at year end, two thirds (67%) of underlying companies were generating positive cash flow/positive earnings per share (EPS) compared to 48% a year earlier. The improved profitability didn’t come at the expense of growth, though: the 18%+ median revenue growth rate seen during the year, significantly above that of the S&P 500. “This dual achievement – maintaining strong growth while enhancing profitability – is a testament to the quality and adaptability of our chosen companies.”
And adaptability is what the investment managers believe is key to a successful investment. For while the US “remains a fertile hunting ground for growth investors” with no shortage of leading businesses to invest in, the fund aims to identify and hold exceptional companies for the long term, “thereby capturing the unique upside that such companies offer.” But to continue to flourish over the long term, a company has to be able to adapt. “In our experience, one of the key features that unites such firms is adaptability. To endure and thrive over the long term, businesses must be able to respond effectively to changing market circumstances and technological paradigms.” Sounds like good advice for investors. Share price barely budged on the day – investors focusing on the long term too, it seems.
Numis: “The focus on high growth companies, in line with Baillie Gifford’s typical approach, means that the portfolio looks very different to any index. As a result, we would expect periods of significant out and underperformance versus the benchmark, which has been demonstrated since launch, and as the managers stress, investors need a long-term investment horizon.”
Partners Group Private Equity (PEY) on a Roll
PEY had a busy first half. The private equity investor adopted a new capital allocation policy; the investment manager met more than three quarters of shareholders by value; and, if that wasn’t enough, there’s even been a name change – so long Princess, hello Partners! Good to see all that activity didn’t impact performance – NAV total return came in at +4.1% for the first half, an improvement on H1 2023’s +3.5% and broadly in line with the peer group.
Encouraging words in Chairman Peter McKellar’s outlook statement too. For despite ongoing macroeconomic and geopolitical headwinds, there are signs of a more supportive environment for mergers & acquisitions: listed indices are rising; lending availability is improving; sentiment is ticking higher; and interest rates are coming down. All of which is feeding through to higher realisation and investment activity. “As we move through the remainder of 2024 and into 2025, the Investment Manager is more confident this increase in activity, sentiment and underlying earnings will translate into valuation uplifts and increased exits and new investments for the Company.” Second half of the year could be just as busy for the Partners as the first then. Time will tell. Investors appear to be taking a breather for now though – share price largely flat on the news.
Numis: “We believe that the buyback policy is well-defined and believe that positive steps have been taken by the Chair Peter McKellar to improve governance and engagement with shareholders.”
Jefferies: “The fund’s largest holding – PCI Pharma Services – is now seen as a near-term exit opportunity. The manager’s execution of this could be key to NAV performance, but more crucially, to initiating share buybacks under the capital allocation policy.”
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The UK investment trusts yielding more than 4.5% (and growing dividends)
Tom Sieber Thursday, August 22
The Bank of England has made its first cut to interest rates for more than four years, which has a direct impact on the income savers will receive on cash. And the lower-than-expected jump in UK inflation reported on 14 August only boosted market expectations that the Bank of England could deliver another rate cut next month.
As the rate environment turns, those who want to grow the income their money generates may want to shift out of cash and money market funds and into the financial markets and, in particular, stocks and shares which offer the potential for both yield and capital appreciation. Dividend paying shares offer a generous income today, but with the added kicker of potential growth in that income stream into the future, although of course dividends are not guaranteed.
But investment trusts can be a good option for those wanting a steady income stream and some potential capital growth. Thanks to their structure, which allows them to hold back income during good years to help sustain payments in more fallow periods, investment trusts often have enviable track records of dividend growth going back years or even decades.
Because they are invested in a diversified portfolio of dividend-paying shares, they also reduce the risks of an individual company cutting or cancelling its dividend.
The yields available from trusts in the AIC (Association of Investment Companies) Global Equity Income sector are appreciably lower than those from the UK Equity Income category. This reflects the relatively depressed valuations in the UK market, particularly compared with the US, and a stronger dividend-paying tradition and higher payout ratios (i.e. the proportion of a company’s earnings paid out in dividends) than in other geographies.
Looking at the list (below) we have included everything with an historic dividend yield of 4.5% or more and have only included trusts that have delivered growth in their dividend over the past five years. This does exclude one of the trusts with the best five-year dividend growth (of more than 11%) in Law Debenture. While the starting yield is a relatively modest 3.7%, the company benefits from a unique combination of a traditional investment trust holding income stocks alongside a cash-generative professional services operating business.
Trust
Discount/premium (%)
10-year share price total return (%)
Ongoing charges (%)
Five-year dividend growth (%)
Dividend yield (%)
Chelverton UK Dividend Trust
1.7
88.3
2.4
7.0
7.5
Abrdn Equity Income Trust
−4.63
41.8
0.9
3.5
7.0
CT UK High Income Trust
−6.79
73.3
1.1
2.2
6.1
Shires Income
−10.20
71.1
1.1
1.8
6.0
Dunedin Income Growth
−11.40
70.0
0.6
2.0
4.9
JPMorgan Claverhouse
−5.05
93.5
0.7
4.6
4.8
Merchants Trust
0.8
105.8
0.6
1.8
4.8
Lowland Investment Company
−11.70
44.5
0.6
3.0
4.8
Schroder Income Growth Fund
−11.00
70.8
0.8
3.2
4.7
City of London
−0.58
84.5
0.4
2.1
4.7
Diverse Income Trust
−8.21
69.4
1.1
3.6
4.5
Source: AIC, data to 15 August
Of the names in the table, Chelverton UK Dividend has the highest yield at 7.5%. Two points to note: it invests in UK small caps – which can be more prone to cutting or cancelling dividends, and it also has very high ongoing charges – 2.44%, according to the AIC.
Another two names are worth highlighting for the income they offer today and income growth potential. The first is Dunedin Income Growth, which focuses on quality companies that meet its sustainability criteria as well as offering ‘real’ income growth over the long term. The trust focuses on names that can sustain dividends, even during tougher times. The portfolio includes UK-listed names like consumer goods giant Unilever and electricity network operator National Grid, supplemented by a couple of overseas selections in Novo Nordisk and ASML. The trust trades at a discount to net asset value (NAV) of 11%, has ongoing charges of 0.64% and yields 4.9%.
The other name in the list to highlight is JPMorgan Claverhouse, where a balanced approach, mixing growth and value, has helped deliver a measure of consistency in returns and where the company has pledged to increase dividends at a rate close to or above inflation. Steered by William Meadon and Callum Abbot, research firm Kepler notes the trust has outperformed in two-thirds of the quarterly periods since the former took over management of the trust in 2012. Like Dunedin there is a focus on quality as well as high yields, with top holdings including the likes of Shell and private equity outfit 3i Group. Ongoing charges are 0.7% and the historic yield is 4.8%.
Here’s how I’d invest my first £500 today for a future filled with passive income.
by John Fieldsend The Motley Fool
One of the less talked about aspects of making your money work for you is the psychological aspect. We are, after all, only human and come with a range of biases and whims we can’t control. And when it comes to our hard-earned money, it’s quite difficult to let go of them, especially when trying to build passive income through the short term erratic behaviour of the stock market.
Imagine investing for the first time in early 2020. I remember quite vividly what it felt like to watch my portfolio crash as the pandemic gripped the world. For a short time, it seemed like lockdowns would last a decade, the stock market would flounder and everything I’d worked towards in my life was going down the toilet. If that was my first time investing I might have wondered why on earth I would subject myself to such a feeling and would have thought: “This is definitely not for me.”
On the other hand, if I’d invested after the recession in 2009 it would have been quite the opposite. The recovery was swift for the FTSE 100. Investing in the index in March 2009 would have given me a 46% return in just a year.
I might have put in £1,000 and quickly seen it shot up to £1,460 or thereabouts and thought: “This is definitely for me.”
Sending us some cash While we can’t remove the element of timing entirely, we can limit its effect on our brains. One way to do that, and I think a great place to start for newer entrants to the world of investing, is dividends. This is where a company shares a portion of the profits directly. They literally send us the cash.
Therefore, even in a down year, we’d expect to see a tangible pile of cash in our accounts. And the FTSE 100 shines with many such big-paying companies that investors prize for reliable and large dividend payments.
Big fry One company like this, and one I hold myself, is Legal & General (LSE: LGEN). It operates in London’s large financial sector and earned revenue of £9bn last year against a market cap of £13bn. The company isn’t small fry, and neither is its dividend.
The forward dividend yield has been rising and now sits at 9.05%. That much cashback would make a pretty sight for a first £500 investment.
L&G has a strong balance sheet and earnings that are growing. These are signs that this isn’t just a stock to buy for a single year of payments, but that it can provide a good place to grow money over the longer term too.
Dividends aren’t guaranteed, of course. Lowered interest rates, if and when they come, will eat into margins a little. The looming threat of a possible global recession was brought more sharply into focus in recent weeks and that’s another point to be cautious of.
But for a first foray into stocks, I think targeting a big dividend payment can do a lot on the psychological side of things. It’s nice to see your money working for you and that’s what a chunky dividend provides in the form of a very real bundle of cash sitting in a brokerage account.
££££££££££££
The emotional benefits of dividend re-investment. In fact, with this investment strategy you can actually welcome falling share prices.
