How to Invest in CEFs (for 8.6%+ Dividends, 20%+ Upside)

Michael Foster, Investment Strategist

What if I told you I could get you a steady 8.6% dividend right now with ease? And with a big slice of that income rolling your way every month, too?

The key is to invest in an often-overlooked investment called a closed-end fund (CEF). As I write this, there are about 500 CEFs in existence, and they yield around 8%, on average. Some pay more than that, such as the 5 CEFs I reveal in my free investor report, “Indestructible Income: 5 Bargain Funds With Steady 8.6% Dividends.”

With a 8.6% average payout, you’d be banking a nice $25,800 yearly income stream (or about $2,150 a month!) on just a $300K nest egg. Imagine what that could do for your retirement. And those dividends are set to stay high in the years to come, no matter what happens with the Fed or the wider economy.

Probably the best thing about CEFs, including the five CEFs I’ll share with you in my free “Indestructible Income” report, is that they hold many of the blue-chip stocks you know well (and are probably sitting in your portfolio right now). So you don’t even have to change investments to get these 8%+ payouts!

The only difference? Instead of settling for lame S&P 500 dividends, you’ll be banking a cool 8.6%. And you’ll set yourself up for potential price upside, too!

At this point you may be wondering why we don’t hear a lot more about CEFs, given the huge dividends these funds pay out. Truth is, they’re overlooked for the silliest of reasons: investors hear “closed-end fund” and immediately think CEFs are too complicated. Journalists don’t help. They’d rather blather on about the newest gadget from the likes of Apple (AAPL) or the latest tweet (X?) from Elon Musk.

CEFs’ Huge Dividends Demystified

That’s too bad because CEFs really are quite simple: they’re like mutual funds or ETFs in that they pool money from investors, which the fund’s managers then use to buy a basket of stocks, bonds, real estate investment trusts (REITs) or other investments, depending on the CEF’s mandate.

The fund managers then buy and sell over time, handing profits over to us as dividends. CEFs trade on public exchanges and can be bought and sold, just like a stock.

(I give you a high-level breakdown of how CEFs work, including how they can generate big price upside while paying you outsized dividends, in your free “Indestructible Income” report.)

CEFs’ “plain vanilla” setup is great for us, for a couple of reasons.

First, and most important, it means CEFs are heavily regulated. Just like big companies, such as Microsoft (MSFT), Home Depot (HD) or Walmart (WMT), CEFs must account for their operations and file statements with the SEC every quarter. Even more reassuringly, most CEFs are managed by the biggest financial institutions, with the most investment resources and deepest connections at their disposal.

BlackRock is the best example. Not many people know that this monolith, whose $11.5 trillion in assets under management dwarfs the GDP of many countries, is a big CEF issuer.

Second, being publicly traded means CEFs are liquid. If you need cash, just sell your shares during market hours, Monday through Friday from 9:30 a.m. to 4 p.m. Eastern time. And buying CEFs has never been cheaper, with the advent of zero-cost trading.

That’s just the start of the great deal you get with CEFs.

Take a CEF called Nuveen Real Estate Income Fund (JRS). It holds high-yielding real estate investment trusts (REITs), which own a range of properties, from shopping malls to warehouses, and are exempt from corporate taxes so long as they pay out 90% of their profits to us as dividends.

The fund hands out a 7.3% dividend as I write this and holds a lot of familiar names in the REIT space, like warehouse owner Prologis (PLD), data center REIT  Equinix (EQIX) and apartment REIT Camden Property Trust (CPT).

Normally, if you bought these stocks on an exchange, you’d have to pay the market price. But with JRS, you’re getting these companies for 4% less than if you bought the shares directly, as of this writing. That may not sound like a lot, but it really is a deal in disguise, as we’ll see in a moment.

This buying opportunity exists even though JRS crushed the benchmark REIT ETF, the Vanguard Real Estate ETF (VNQ), since the depth of the pandemic selloff, something many pundits will tell you an actively managed fund simply isn’t supposed to do.

JRS Clobbers Its Benchmark—and It’s Still Cheap!

How is this possible? Because of a funny quirk with CEFs: they tend to trade for less than what their portfolios are actually worth. And their current portfolio value is laid right out in front of us through a figure called net asset value, or NAV, which is easy to spot on any CEF screener worth its salt. Many CEFs, like the five I spotlight in your free “Indestructible Income” report, will go from trading at a discount to a premium and back again on the regular.

JRS is a good example: in the last decade, it’s traded at premiums as high as 4% and discounts as wide as 20%.

This, in effect, gives us a “buy low, sell high” setup that actually works: we simply buy our CEFs when they trade at unusual discounts and then sell when those discounts flip to premiums! And you get paid well to ride that particular train, with payouts like JRS’s 7.3% yield. This is why investors—particularly billionaire investors—love CEFs!

How to Buy in 3 Simple Steps

The first step to participating in the CEF market is easy: open a brokerage account. Any brokerage that lets you buy and sell shares will allow you to buy and sell CEFs. And now that many trading platforms require a low (or no) minimum to open an account, along with zero brokerage fees, there’s really no barrier to anyone getting into CEFs.

After you’ve opened your account, you’ll need to select the best CEF for you. There are a lot of things to consider in this step, so be sure to take your time and do your research. (I’ll give you some proven, actionable tips for picking the best of these funds—and avoiding the laggards, in “Indestructible Income.”)

You’ll need to consider what asset class you want to buy into (stocks? municipal bonds? real estate?). Then you’ll need to decide what yield you want (is 6% enough? Want 7%? 9%?). You’ll ideally want to choose a fund that is well managed and trades at a big discount. Here too, research is the key.

Finally, all you need to do is log into your brokerage account, enter the ticker for the fund you’ve chosen—like JRS above—and click “Buy.” Then sit back and let the dividends come to you.

How We’re Playing This “Ruthless Selloff” for 8%+ Dividends

Michael Foster, Investment Strategist

The market pullback we’ve seen in the last couple of weeks really hasn’t come as a surprise to me. The economy is sending what you could—at best—call mixed signals right now. And stocks, as they do in uncertain times, are reacting.

I expect more volatility ahead, so today we’re going to talk about ways to protect ourselves while maintaining the 8%+ dividend streams we’re drawing from our favorite closed-end funds (CEFs).

Instead we’re going to focus on a strategy that’s been around as long as investing itself—diversification—by putting a bit more weight on assets beyond stocks.

That’s what’s great about CEFs: You can buy CEFs that hold a range of assets, such as the two I see as great diversification picks today: the preferred-stock-focused Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund (PTA), with an 8.4% payout; and the PGIM Global High Yield Fund (GHY), a global bond fund with a 9.6% dividend. (Note that GHY is a holding in our CEF Insider portfolio.)

Regular readers of CEF Insider know we’ve been expecting the pivot we’ve recently seen in stocks and have discussed it in the last couple of issues. After seeing the inevitable recovery from the 2022 mess throughout 2023 and 2024, it was clear that stocks had gotten ahead of themselves.

For now, though, let’s run through the economic picture we have in front of us, and how it tees up growth for GHY and PTA.

US GDP Growth: Still Healthy, but a Little Bit Light

Over the last half-decade, the US economy has been growing at a strong clip, and we’ve settled at around a 2.5% growth rate after inflation (that mention of inflation is important: we’re talking about real growth in the economy, regardless of how high or low inflation is).

This is good news, and it points to a basic stability in the economy that, over the long term, is bullish; America is growing at around 2.5% per year, pretty close to the 3.1% average we’ve seen since 1948 and close enough to the 2.8% average we’ve seen in the last 50 years.

In short, the economy overall isn’t in a bubble, nor is it in a sharp contraction. Things are, well, pretty okay at the moment. That’s worth remembering after a month of ruthless selloff action because it tells us that in the long term, investments—including stock investments—will pay off, as they always have.

Still, markets, as they say, take the escalator up and the elevator down, and it seems like we’ve already gotten in and someone has pushed the “down” button. So what should we do?

There is growing evidence saying that, yes, we should seek alternatives to stocks now.

That’s something we’ve been actively doing in CEF Insider in recent months and will continue to do. This is also where PTA and GHY come in, as we’ll see in a moment.

First on the negative side, there are signs that both wealthy and lower-income consumers are losing confidence in the economy, with a decline similar to what we saw in 2020, when the pandemic hit, and in 2021/2022, due to post-pandemic inflation.

Source: Apollo Academy

This needs to be taken with a grain of salt, however. After all, the economy was fine in 2021, and 2020 was a great year for stocks, even with the pandemic, thanks to the Fed’s intervention. But sentiment leads behavior, and if this negativity gets entrenched, we could see more people cut back on spending.

More Reason Not to Panic

The above chart is where we can see some really good news, though. While it looks like there’s been a big slide in year-over-year retail-sales growth over the last few years, this is wholly due to pandemic effects. In 2021, we saw a huge gain in spending because people could leave their homes again, and the slide in 2022, to a slight decline in January 2024, was a normalizing effect, like a slingshot that was pulled tight and then released before going slack.

And since a year ago, we’ve seen a steady rise in retail sales, to a 4% year-over-year growth rate as of January 2025. That’s a healthy clip, and it signals that most Americans aren’t pulling back quite yet.

Still, there are alternative indicators showing that some parts of the economy are seeing weaker spending. Those include the National Retail Federation’s more real-time indicator showing that retail sales went negative on a month-over-month basis in January and February.

So we’re seeing at least some consumer pullback as some people feel less secure in the future of the United States economy.

Grounding Ourselves With 8%+ Dividends

If you are experiencing whiplash, I get it! Mixed economic data is notoriously tough to drill down into. But the key thing to keep in mind is that everything here points to a “mid-cycle” economy, where America is no longer going gangbusters, but it’s not in a sharp pullback, either.

That said, we are closer to a recession than we’ve been in the last four years. Which is why it’s time to pivot toward high-yielding alternative funds like the two I mentioned earlier.

Two 8%+ Yielding Funds to Diversify Beyond Stocks

Let’s start with the 8.4%-paying Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund (PTA), which is cheap, with its discount to net asset value (NAV, or the value of its underlying portfolio) coming in at 6.8% as I write this, well below the fund’s 4.9% average discount over the last year. This indicates that the discount’s decline is purely the result of the market panic.

That’s partly because PTA is misunderstood by most investors. It holds preferred stocks, which essentially means it benefits from higher, stable dividends even if stocks fall (since they yield more on average and payouts are prioritized over those of common stock dividends). Preferred-stock funds tend to suffer short-term volatility when stocks first take a hit, along with any other non-government asset, only to recover soon after, when their high dividends attract passive income-seeking investors.

Moreover, PTA benefits if the US economy is seen as weakening because that would push the Fed to cut interest rates. That, in turn, boosts the value of PTA’s portfolio, since preferreds, like bonds, go up in price as rates fall.

Now let’s talk about the PGIM Global High Yield Fund (GHY), with a 9.6% dividend and a discount that’s raced toward par lately: It now trades at just a 0.8% discount to NAV.

I see that modest discount flipping to a premium because GHY, like PTA, will benefit if America’s economy is seen as weakening. That’s because a weaker economy means a weaker dollar, and a weaker dollar would, in turn, boost the value of the foreign bonds in which GHY invests.

In short, both funds should be safe havens for income-hungry investors on more stock-market weakness. That makes both attractive pickups now, with GHY getting the edge from me, due to its bigger yield and “discount momentum.”

Something else I recommend buying when markets are in a panic? Stocks and funds that pay monthly dividends.

Monthly payers are a lifesaver now, because a payout that rolls our way every single month gives us confidence that their managers know they can keep the dividend cash coming our way, no matter what.

After all, they know a dividend is a promise—and they wouldn’t fork one out every month if they weren’t sure they could keep doing so.

That kind of peace of mind is vital today. And the good news is that there are plenty of monthly paying CEFs out there to choose from

Whilst the only consideration for the Snowball is the dividend to buy more Trusts that pay a dividend, if you are lucky and one of your shares which was trading at a discount is bid for you can take your profit and re-invest the profits back into your portfolio earning more cash to buy more Trusts that pay a dividend.

All figures from 2nd January 2025.

CRT and WHR have now left the Watch List.

How We’re Playing This “Ruthless Selloff” for 8%+ Dividends

by Michael Foster, Investment Strategist

The market pullback we’ve seen in the last couple of weeks really hasn’t come as a surprise to me. The economy is sending what you could – at best – call mixed signals right now. And stocks, as they do in uncertain times, are reacting.

I expect more volatility ahead, so today we’re going to talk about ways to protect ourselves while maintaining the 8%+ dividend streams we’re drawing from our favorite closed-end funds (CEFs).

Instead we’re going to focus on a strategy that’s been around as long as investing itself – diversification – by putting a bit more weight on assets beyond stocks.

That’s what’s great about CEFs: You can buy CEFs that hold a range of assets, such as the two I see as great diversification picks today: the preferred-stock-focused Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund (PTA), with an 8.4% payout; and the PGIM Global High Yield Fund (GHY), a global bond fund with a 9.6% dividend. (Note that GHY is a holding in our CEF Insider portfolio.)

Regular readers of CEF Insider know we’ve been expecting the pivot we’ve recently seen in stocks and have discussed it in the last couple of issues. After seeing the inevitable recovery from the 2022 mess throughout 2023 and 2024, it was clear that stocks had gotten ahead of themselves.

And to be sure, the signals the economy is giving off remain murky. If the S&P 500 were to fall to a 10% decline from the start of the year, that may be a great buying opportunity (it’s off about 3% from January 1 as I write this).

For now, though, let’s run through the economic picture we have in front of us, and how it tees up growth for GHY and PTA.

US GDP Growth: Still Healthy, but a Little Bit Light

Over the last half-decade, the US economy has been growing at a strong clip, and we’ve settled at around a 2.5% growth rate after inflation (that mention of inflation is important: we’re talking about real growth in the economy, regardless of how high or low inflation is).

This is good news, and it points to a basic stability in the economy that, over the long term, is bullish; America is growing at around 2.5% per year, pretty close to the 3.1% average we’ve seen since 1948 and close enough to the 2.8% average we’ve seen in the last 50 years.

In short, the economy overall isn’t in a bubble, nor is it in a sharp contraction. Things are, well, pretty okay at the moment. That’s worth remembering after a month of ruthless selloff action because it tells us that in the long term, investments – including stock investments – will pay off, as they always have.

Still, markets, as they say, take the escalator up and the elevator down, and it seems like we’ve already gotten in and someone has pushed the “down” button. So what should we do?

There is growing evidence saying that, yes, we should seek alternatives to stocks now.

That’s something we’ve been actively doing in CEF Insider in recent months and will continue to do. This is also where PTA and GHY come in, as we’ll see in a moment.

First on the negative side, there are signs that both wealthy and lower-income consumers are losing confidence in the economy, with a decline similar to what we saw in 2020, when the pandemic hit, and in 2021/2022, due to post-pandemic inflation.

This needs to be taken with a grain of salt, however. After all, the economy was fine in 2021, and 2020 was a great year for stocks, even with the pandemic, thanks to the Fed’s intervention. But sentiment leads behavior, and if this negativity gets entrenched, we could see more people cut back on spending.

More Reason Not to Panic

In the chart is where we can see some really good news, though. While it looks like there’s been a big slide in year-over-year retail-sales growth over the last few years, this is wholly due to pandemic effects. In 2021, we saw a huge gain in spending because people could leave their homes again, and the slide in 2022, to a slight decline in January 2024, was a normalizing effect, like a slingshot that was pulled tight and then released before going slack.

And since a year ago, we’ve seen a steady rise in retail sales, to a 4% year-over-year growth rate as of January 2025. That’s a healthy clip, and it signals that most Americans aren’t pulling back quite yet.

Still, there are alternative indicators showing that some parts of the economy are seeing weaker spending. Those include the National Retail Federation’s more real-time indicator showing that retail sales went negative on a month-over-month basis in January and February.

So we’re seeing at least some consumer pullback as some people feel less secure in the future of the United States economy.

Grounding Ourselves With 8%+ Dividends

If you are experiencing whiplash, I get it! Mixed economic data is notoriously tough to drill down into. But the key thing to keep in mind is that everything here points to a “mid-cycle” economy, where America is no longer going gangbusters, but it’s not in a sharp pullback, either.

That said, we are closer to a recession than we’ve been in the last four years. Which is why it’s time to pivot toward high-yielding alternative funds like the two I mentioned earlier.

Two 8%+ Yielding Funds to Diversify Beyond Stocks

Let’s start with the 8.4%-paying Cohen & Steers Tax-Advantaged Preferred Securities and Income Fund (PTA), which is cheap, with its discount to net asset value (NAV, or the value of its underlying portfolio) coming in at 6.8% as I write this, well below the fund’s 4.9% average discount over the last year. This indicates that the discount’s decline is purely the result of the market panic.

That’s partly because PTA is misunderstood by most investors. It holds preferred stocks, which essentially means it benefits from higher, stable dividends even if stocks fall (since they yield more on average and payouts are prioritized over those of common stock dividends). Preferred-stock funds tend to suffer short-term volatility when stocks first take a hit, along with any other non-government asset, only to recover soon after, when their high dividends attract passive income-seeking investors.

Moreover, PTA benefits if the US economy is seen as weakening because that would push the Fed to cut interest rates. That, in turn, boosts the value of PTA’s portfolio, since preferreds, like bonds, go up in price as rates fall.

Now let’s talk about the PGIM Global High Yield Fund (GHY), with a 9.6% dividend and a discount that’s raced toward par lately: It now trades at just a 0.8% discount to NAV.

I see that modest discount flipping to a premium because GHY, like PTA, will benefit if America’s economy is seen as weakening. That’s because a weaker economy means a weaker dollar, and a weaker dollar would, in turn, boost the value of the foreign bonds in which GHY invests.

In short, both funds should be safe havens for income-hungry investors on more stock-market weakness. That makes both attractive pickups now, with GHY getting the edge from me, due to its bigger yield and “discount momentum.”

Is this the FTSE 100’s best dividend share?

Christopher Ruane weighs some pros and cons of a high-yield FTSE 100 share he believes investors should consider for their portfolio.

Posted by

Christopher Ruane

BATS

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.Read More

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. 

Like many investors, I appreciate a good blue-chip income share tucked away in my portfolio, quietly generating passive income streams year after year. One FTSE 100 share I own has a stellar track record when it comes to dividends.

Could it be the best FTSE 100 share for an income investor to consider?

High yield but a mixed share price track record

The share in question is British American Tobacco (LSE: BATS). Its dividend yield stands at 7.5%.

That is some distance from being the highest yield in the FTSE 100 index. Phoenix Group (LSE: PHNX) yields 9.2% and this week announced another increase in its annual dividend per share.

Still, British American’s yield puts it among the higher-yielding shares in the even if it is not top of the board. At a 7.5% yield, £20k invested today would hopefully earn an investor £1,500 in passive income annually.

Outstanding track record of dividend growth

In reality, the passive income could be even higher than £1,500 each year.

British American has grown its dividend per share annually for decades. It has committed to keep doing so. As dividends are key to the investment case, I think the board sees this progressive dividend policy as being of primary importance.

A few other FTSE 100 members, such as Diageo and Spirax, have longer streaks of annual dividend growth. But, again, British American is among the index’s best-performing shares on this metric. Phoenix, incidentally, has grown its dividend over each of the last few years, but cut it less than a decade ago.

Mixed long-term income outlook

No dividend is ever guaranteed to last.

While British American’s track record of regular annual raises is impressive, it is not necessarily indicative of what to expect in future.

The business is highly cash generative. British American owns premium brands like Lucky Strike that give it pricing power. The addictive nature of nicotine also means that British American has pricing power. It has other strengths too, including a global distribution network.

But there is a big caveat here – cigarette demand is declining in many markets. While non-cigarette products like vapes may help British American offset that to some extent, the long-term volume outlook remains unclear – as does the question of whether profit margins can come anything close to, let alone match, those of cigarettes.

An income share to consider, with risks

That matters because it could impact cash flows at the FTSE 100 firm.

If that happens, it could mean the dividend comes under review. Rival Imperial Brands slashed its payout per share in 2020. British American could yet be forced to do the same at some point in future.

So, while its yield and record of dividend growth put it in the top tier of FTSE 100 dividend shares as far as I am concerned, there are significant risks here.

Based on that, I do not think that British American is definitely the best dividend share in the FTSE 100.

One of the best ? Maybe.

I do see significant attractions. I continue to see this as a share income-focussed investors should consider.

These 5 FTSE growth stocks are stinking out my SIPP! Time to sell?

Harvey Jones is happy with the performance of his Self-Invested Personal Pension but unfortunately five growth stocks are casting along shadows.

Posted by

Harvey Jones

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..

Growth stocks are supposed to deliver excitement and reward patience. But right now, five are stinking out my Self-Invested Personal Pension (SIPP). So let’s name and shame them: Diageo, JD Sports Fashion , Glencore, Ocado Group and Aston Martin.

I bought them accross 2023 and early 2024 while consolidating three old pensions into a single pot. My SIPP contains 20 UK stocks and has done well overall, thanks to a steady stream of dividends and some big winners that have doubled in value. But these five have been dead weight.

Glencore‘s down 25% over the last year, Diageo -27%, and JD Sports -30%. Ocado has slumped 45% and Aston Martin has tumbled nearly 55%. These last two have plunged into the FTSE 250.

So what went wrong? And should I cut my losses ?

These UK shares smell bad

Diageo’s once-reliable premium spirits business has hit a rough patch, with sales slowing in key markets such as the US and Latin America.

Inflation has made high-end brands harder to shift, while China’s post-Covid reopening hasn’t sparked the hoped-for recovery. The shares look tempting at today’s lower price, but I’m not expecting a quick shot of growth.

Commodity stocks rise and fall with the global economy and, right now, Glencore’s on the wrong side of that cycle. The slowdown in China has hit demand for key materials while its successful coal business is under fire from net zero campaigners. The stock could bounce back when economic sentiment improves but, for now, it’s a waiting game.

I had doubts about Ocado Group even when I bought in, but the dream of a tech-driven logistics powerhouse was too enticing. As yet, its partnerships with global supermarkets haven’t delivered the expected returns, although Ocado Retail is picking up. I can see a scenario where Ocado turns things around, if I use binoculars.

I bought Aston Martin despite its messy financials, eye-watering debt and bumpy history. The latest models look fantastic, but the company still needs to prove it can operate profitably. Right now, I’m not convinced.

JD Sports is a real pain

Of the fateful five stinkers, JD Sports hurts the most. I had high hopes, and even averaged down as the price dropped. But it’s been a disaster. The company’s ambitious US expansion is backfiring, with the American economy struggling and trade tariffs threatening footwear imports. British consumers aren’t feeling much richer either, which doesn’t help.

JD Sports has a solid business model. It dominates the UK sports retail market and its brand is strong. But the barely-there 0.77% yield makes recent struggles even harder to bear. My faith in the recovery’s fading, but I’m not selling.

The JD Sports share price now looks brilliant value with a price-to-earnings ratio of just 6.4. When sentiment shifts, I think the share price could fly. As with all of these stocks, I’m willing to put up with the stink a while longer.

Aston Martin and Ocado could take years to recover, if they ever do. And while JD Sports, Glencore and Diageo have clearer paths to a rebound, there are no guarantees. For now, I’ll hold my nose and wait. And pick my growth stocks more carefully in future.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Harvey Jones has positions in Aston Martin Lagonda Global Plc, Diageo Plc, Glencore Plc, JD Sports Fashion, and Ocado Group Plc. The Motley Fool UK has recommended Diageo Plc. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro.

Triple whammy: Equity trusts with a high yield, wide discount and strong performance

The International Biotechnology Trust ticks all three boxes.

By Emma Wallis

News editor, Trustnet

  

Investors who want to grow their capital and simultaneously earn an income often opt for equity income funds but some investment trusts offer a compelling alternative.

Not only do many trusts have a yield above 4% but several of them are trading at wide discounts to their net asset value (NAV), offering investors the chance to snap up a portfolio of stocks on the cheap.

To avoid value traps and poor performers, Trustnet scrutinised the total returns of trusts on double-digit discounts with yields above 4% to find those with the strongest track records.

The International Biotechnology Trust ticked all three boxes comprehensively. It has a 4.4% yield and a 12% discount, according to data from the Association of Investment Companies (AIC), and has beaten its benchmark and sector over one, three, five and 10 years to 18 March 2025.

The current managers, Ailsa Craig and Marek Poszepczynski, have only been in charge since March 2021, so are responsible for four years of the trust’s track record.

It is the best-performing trust in the seven-strong IT Biotechnology & Healthcare sector over the past 12 months and second over three and five years.

Performance of trust vs benchmark & sector over 5yrs

Source: FE Analytics

The trust has a policy of making dividend payments equivalent to 4% of its net asset value at the end of the preceding financial year, through two equal semi-annual distributions.

Shareholders include the MIGO Opportunities Trust, managed by Charlotte Cuthbertson and Nick Greenwood at Asset Value Investors, and the CT Global Managed Portfolio Trust, led by Columbia Threadneedle Investments’ Peter Hewitt, who holds it within his income portfolio.

Cuthbertson said: “In a sector known for its volatility, Craig’s expertise and resilience particularly shines. Her biological insight and investment acumen, alongside co-manager Poszepczynski, have been crucial in navigating the complexities of the biotech sector with precision.”

The abrdn Asian Income Fund also achieved the triumvirate of yield, discount and returns, although it did not outperform in every time period. It beat its sector and benchmark over three and five years but trailed both over a decade. It has increased its dividend for 16 consecutive years, according to the AIC, and currently has a yield of 7.3%. It is trading on a discount of 10.2%.

Performance of trust vs benchmark & sector over 5yrs

Source: FE Analytics

Anthony Leatham, head of investment companies research at Peel Hunt, said: “The abrdn Asian Income Fund offers a strong combination of attractive total returns and a yield premium over the market and peer group, supported by a consistent dividend track record.

“We believe the disciplined focus on quality, dividends, valuation and growth, along with the constant reappraisal of companies in the portfolio and portfolio positioning, bodes well for both index outperformance and potential discount narrowing.”   

Aberdeen’s well-resourced Asian equity team includes 40 investment professionals across six local hubs and Yoojeong Oh leads the income strategies.

“The team’s edge has been across mid-cap companies with strong balance sheets, often with family ownership. We also see the benefits of regular and proactive engagement,” Leatham said.

Asia is becoming an attractive region for income-seeking investors. Half of the Asia Pacific ex-Japan index currently yields more than 3% and over 50% of the total return from Asian equities is being delivered by dividends, supported by robust free cashflow cover and strong balance sheets, he noted.

Elsewhere, Ecofin Global Utilities and Infrastructure is a contender with a 4.3% yield and a 10.3% discount, but it is difficult to measure its performance. It does not have a single benchmark and there are only two trusts in the IT Infrastructure Securities sector, although Ecofin has beaten its rival – Premier Miton Global Renewables – by a wide margin over one, three and five years.

On its factsheet, it shows five different indices as yardsticks, spanning infrastructure, utilities and stocks: S&P Global Infrastructure; MSCI World Utilities; MSCI World; FTSE All Share; and FTSE ASX Utilities.

Performance of trust vs sector & relevant indices over 5yrs

Source: FE Analytics

Widening the net to investment companies on a discount of 7% or more brings another crop of triple-threat trusts into the scope of this research.

JPMorgan European Growth & Income has a 4.2% yield and a 7.6% discount. It has outperformed its benchmark over one, three, five and 10 years, although it lagged its sector over a decade.

The trust has an FE fundinfo Crown Rating of four, placing it within the top 25% of its asset class for alpha, volatility and consistently beating its benchmark over the past three years.

It is managed by Alexander Fitzalan Howard, Tim Lewis and Zenah Shuhaiber and its largest holdings are Novo Nordisk, SAP, Novartis, ASML and Roche.

Performance of trust vs benchmark & sector over 5yrs

Source: FE Analytics

Marcus Phayre-Mudge’s TR Property beat its benchmark over three, five and 10 years but was in line with its peer group average. It has a 5.3% yield and an 8.5% discount. The trust has increased its dividend for 14 consecutive years.

Elsewhere, BlackRock Frontiers hurdled the MSCI Frontier Markets index over three, five and 10 years (however, it changed its benchmark in 2018 to the MSCI Emerging ex Selected Countries + Frontier Markets + Saudi Arabia Index).

It was included in Peel Hunt’s income playbook for 2025  has a 4.8% yield. Its income stream comes from cash generated by its underlying investments (as opposed to a yield target).

Led by Sam Vecht, the trust is trading on a 7.2% discount and its portfolio is cheap, according to Leatham; back in January, it had a price-to-earnings ratio of approximately 8x. Frontier markets overall look attractively valued compared to global developed market equities, so the trust offers a double discount, he added.

Three other trusts had a yield above 4% and a discount wider than 7% but a mixed track record.

JPMorgan Asia Growth & Income beat its benchmark over one, five and 10 years but lagged over three years and fell behind its peer group average over three and five years. It has a 4.2% yield and a discount of 8.2%.

BlackRock World Mining bested its peer group over five and 10 years but fell behind over one and three years. It boasts a 4.6% yield and a 9.8% discount.

Finally, Murray International beat its bogie over one, three and five years but not over 10. It hurdled the peer group average over three years but trailed during other periods.

It has a 4.4% yield and recently became an AIC ‘Dividend Hero’ for increasing its dividend for the 20^th consecutive year in 2024.

The trust was run by veteran stockpicker Bruce Stout until his retirement last year and is now co-managed by Martin Connaghan and Samantha Fitzpatrick, who worked alongside Stout since 2017 and 2019, respectively. It is trading on a 7.5% discount.

Currently there is £1,442 xd and cash for re-investment of £747

Next dividends to be received at the end of next week for re-investment.

It could be possible to open a new position for the Snowball, the risk being the more Trusts you own the higher the risk of buying a clunker. The cash will most probably be added to the current higher yielders in the portfolio.

But as in politics, a week is a long time.