As the Snowball rolls down a hill it gathers more snow.
The blog gathers more shares every time it re-invests the dividends.
When the market crashes most shares fall at the same time, you could always sell your shares but easier with hindsight and if your are out of the market you will not have dividends to re-invest.
The Snowball is going to build, over time one position that can be sold to buy a market bargain. Without hindsight you can only buy at the bottom with luck but you can buy the yield when it falls to a yield you would be happy to earn forever.
The yield will be less than 7%, so it will be a drag on performance, that is until the market crashes but the income for the Snowball will still equal this year’s fcast of a yield of 9%. Cash for re-investment to be received on Thursday.
A UK share, investment trust and ETF to consider for an £870 second income this year
The London stock market’s a great place to invest for a second income, in my opinion. Here are three top dividend stocks on my radar.
Posted by Royston Wild
Published 8 June
Image source: Getty Images
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.
Diversification’s critical when seeking a reliable second income over time. A broad portfolio can absorb individual dividend shocks better than one containing just a handful of stocks.
Spreading risk over a number of investments doesn’t mean settling for inferior returns either. Take the following shares, investment trusts and exchange-traded funds (ETFs), for example:
StockForward dividend yield
Target Healthcare REIT8.6%
iShares World Equity High Income ETF9%
Phoenix Group (LSE:PHNX)8.5%
As you can see, the dividend yield on each of these stocks comfortably beats the FTSE 100 average (currently around 3.4%). It means a £10,000 investment spread equally across them could — if broker forecasts are accurate — provide an £870 passive income over the next year alone.
What’s more, a portfolio containing just these three stocks would provide (in my view) exceptional diversification. In total, these investments deliver exposure to 346 different companies spanning multiple sectors and global regions.
Here’s why I think they’re worth serious consideration today.
The investment trust
Real estate investment trust (REIT) Target Healthcare’s set up to deliver a steady stream of dividends to shareholders. These entities must pay at least 90% of annual earnings out this way in exchange for juicy tax breaks.
By focusing on the care home sector — it owns 94 in total — this trust has exceptional long-term potential as the UK’s elderly population booms. It also benefits from the sector’s highly stable nature, while inflation-linked leases boost earnings visibility still further.
Be mindful though, that labour shortages in the nursing industry could dent future returns.
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.
The ETF
The iShares World Equity High Income ETF is focused primarily on high-yield and dividend growth stocks. In total, it holds 344 different businesses around the globe, from tech giants Nvidia and Microsoft to insurers like Axa, telecoms such as Deutsche Telekom and banks such as JPMorgan.
However, it also earns income from safe havens like cash and US Treasuries, which provides strength during economic downturns.
The fund’s focused primarily on US shares. In total, these account for 67.8% of total holdings. I don’t think this is overly excessive, but bear in mind that this could impact the fund’s growth potential if sentiment towards US assets more broadly cools.
The share
Phoenix Group, like Legal & General and M&G, is a highly cash-generative financial services provider. And so like those other businesses, it offers one of the three highest forward dividend yields on the FTSE 100 today.
In fact, Phoenix has a sound track record of beating its cash generation forecasts and providing subsequent meaty windfalls to shareholders. During 2024, total cash generation was expected at £1.4bn-£1.5bn. In the end it came in at a whopping £1.8bn!
Like Target Healthcare, I believe it’s well-placed to capitalise on Britain’s growing older population. I’m optimistic demand for its savings and retirement products will grow steadily.
On the downside, this year’s predicted dividend is covered just 1.1 times by expected earnings. However, a Solvency II ratio of 172% could give it scope to meet analysts’ dividend forecasts, even if this year’s profits disappoint.
Combination with Henderson International Income Trust plc
Results of the Scheme and Issue of Scheme Shares
Results of the Scheme and Issue of Scheme Shares
The Board of JPMorgan Global Growth & Income plc (the “Company” or “JGGI“) is pleased to announce that the Company will acquire substantially all of the net assets from Henderson International Income Trust plc (“HINT“) in exchange for the issue of 64,261,713 new shares in the capital of JGGI (“SchemeShares“) in connection with the voluntary winding up of HINT pursuant to a scheme of reconstruction under section 110 of the Insolvency Act 1986 (the “Scheme“) following the passing today of the resolution proposed at the Second General Meeting of HINT.
28 May 2025
The dividend policy is to make quarterly distributions with the intention of paying dividends totalling at least 4 per cent. of its NAV per Share as at the end of the preceding financial year, funded by distributable reserves where necessary. This policy provides the Investment Manager with the flexibility to adapt the portfolio to meet different market environments, which aligns favourably with HINT’s recently enhanced investment and distribution policy. JGGI’s policy has resulted in an annualised dividend growth rate of 7.2 per cent. since the start of the 2018 financial year.
Until the amalgamation of HINT completes there will be some churn.
Here’s how investors can target a £50k passive income in retirement with an ISA !
Story by Royston Wild
MotleyFool
You’ll often read that Stocks and Shares ISAs are the best way to build cash for retirement. This is thanks to the excellent long-term returns that share investing tends to provide.
With a £500 monthly investment, here’s how an investor could generate a healthy passive income in retirement.
£50k passive income
As I mentioned, the returns enjoyed by Stocks and Shares ISA investors can be considerable. At 9.64%, the average yearly return for the last 10 years trumps the 1.21% return that the Cash ISAs provided. That’s according to price comparison website Moneyfacts.
Accordingly, prioritising investment in one of these riskier products could be the most effective way to build enough wealth for a comfortable retirement. Of course, Cash ISAs can also play a vital role in wealth creation by reducing risk and providing a stable return across the economic cycle.
Let’s consider how someone with £500 to invest each month could make it work. How much they split between share investing and cash will involve a delicate balance between their long-term goals and their attitude to risk. In this case, let’s say they prefer a 75/25 split that might deliver solid growth while also providing a safety net.
If they can match the averages of the last decade, they would — after 30 years — have:
£785,269 in their Stocks and Shares ISA
£54,220 in their Cash ISA
This would give them a combined retirement portfolio of £839,489 they could use for a passive income. With this money, they could purchase dividend shares, which should give them a steady flow of income. It would also give them a chance to continue growing their portfolio.
If they bought shares yielding 6%, they’d have £50,369 to live on each year from their portfolio. Combined with the State Pension, this could give them a bountiful total retirement income.
A top trust
Investment trusts like the JPMorgan Global Growth & Income (LSE:JGGI) product can be great ways to build wealth with a Stocks and Shares ISA.
Thise diversified approach provides a way to target capital gains and passive income in a way that effectively spreads risk. The JPMorgan vehicle’s aim is to hold between 50 and 90 companies at any one time, across a spectrum of industries and regions:
Benchmark is the MSCI AC World Index. Source: JPMorgan
Through the use of gearing (borrowed funds) — which today stands at 1.85% of shareholders’ capital — the trust’s managers can also better capitalise on investing opportunities as they arise.
Like other equity-based investment trusts, JPMorgan’s product can still fall during broader stock market downturns despite its diversified approach. Its use of gearing may also present higher risk. But I think its long-term record speaks for itself.
Delivering an average annualised return of 12.8% since 2015, it’s proved a great way for UK investors to build wealth for retirement.
If you used a 50/50 split and pair traded it with a higher yielder from the watch list, you could still earn a blended yield of 7%, there will be years when JGGI returns a negative figure.
When searching for passive income stocks, it’s easy to be swayed by high dividend yields. The higher the yield, the more the income, right?
Technically, yes. However, relying solely on the yield can end in disaster if the company lacks a reliable dividend track record. That’s why this lesser-known UK stock with an 11.4% yield and 17 years of uninterrupted dividend growth caught my attention.
But is there more to the story?
Henderson Far East Income
Henderson Far East Income‘s (LSE: HFEL) a British investment trust that isn’t on the FTSE 100 or FTSE 250 yet. For that reason, it’s flown under my radar for some time.
As the name suggests, it invests in major East Asian companies such as TSMC, China Construction Bank and Alibaba. It invests mostly in financial services and technology, with 20% of assets in China, 15% in Hong Kong, 12% in South Korea and the rest spread across the region.
The trust’s commitment to delivering a high and growing income’s evident in its consistent dividend policy, with payments fully covered by revenues. Recently, its revenue reserves have reached an all-time high, providing a cushion for future payouts. This reliability’s particularly attractive for investors seeking a steady income.
Capital growth prospects
While HFEL’s primary focus is income, it also aims for capital growth. In the year to October 2024, the trust achieved a 17.4% net asset value (NAV) return — a notable improvement on previous years. This is attributed to a strategic portfolio shift towards structural growth opportunities in markets like India and Indonesia, and reduced exposure to China. The trust’s diversified approach across various sectors and countries positions it to capitalise on Asia’s evolving economic landscape.
The trust’s impressive dividend policy is certainly reassuring, but there are still some areas of concern. For instance, its heavy focus on the Asia-Pacific region exposes it to geopolitical tensions, currency fluctuations and regulatory changes.
In the past, economic challenges in China have impacted performance and may well do so again. Additionally, the use of gearing amplifies both potential gains and losses, adding another layer of risk. At times, it can run at a high premium to NAV, which can affect the long-term value of the investment.
Calculating returns
Unfortunately, the fund’s price performance hasn’t been spectacular, which weighs on total returns. Over the past 10 years, the share price is down 25%. However, when adjusting for dividends, it’s returned around 42% to shareholders — equating to a rather weak annualised return of 3.57%.
After being in a steady decline since late 2017, the price is now near a 15-year low. That means it could be a great entry point if Asian markets recover in the coming years. However, if it continues the same performance over the next decade, it’s likely to return less than a simple FTSE 100 index tracker.
Whether or not an investor wants to consider it would be based on their expectations in that regard. Yes, it may pan out to be a good opportunity, but for now, I’m keeping my sights set on dividend stocks with higher overall returns.
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DIY Investor Diary: why investment trusts form bedrock of my portfolio
In the latest article in our series, a DIY investor explains his approach to paying himself an income at retirement, shares his top tips for investment success, and acknowledges a ‘weakness’ in knowing when to sell.
12th September 2023
by Kyle Caldwell from interactive investor
In our new DIY Investor Diary series, we speak to interactive investor customers to find out how they invest in funds and investment trusts, what their goals and objectives are, current issues and concerns regarding their portfolio, and what they’ve learned along the way.
For income-seeking investors who want a regular cash flow, the investment trust structure is arguably more attractive than open-ended funds. This is because investment trusts do not have to distribute all the income generated by their assets every year, as up to 15% a year can be retained in so-called revenue reserves. When there’s an income shortfall, those reserves can be utilised to keep dividends flowing.
In contrast, funds are required to pay out all the income they receive each year from the underlying investments. Therefore, when there’s an income drought, funds have no option but to cut their dividends, as was the case during Covid-19 and the global financial crisis. Most investment trusts, however, retained or increased their dividends by dipping into their reserves.
Therefore, if consistency of income is of high importance, investment trusts may be better than funds, which are structured as unit trusts or OEICs.
The DIY investor who features in this article is 79 and taking advantage of the investment trust structure to supplement his retirement. He takes around £10,000 a year from his investments – held in a SIPP and an ISA – with investment trusts forming the bedrock of his portfolio.
He says: “I am using my investments to pay myself an income, taking £10,000 a year. This mainly comes from dividends paid, but I am also prepared to sell down or sell out of a holding.”
As well as investment trusts being consistent income payers, with nine trusts in the 50-year plus dividend club, another feature of investment trusts that is typically beneficial is their ability to gear (or borrow) to invest.
While this can go the other way, by causing greater losses in falling markets, over time stock markets generally rise. As a result, long-term investors in a geared investment trust can see their returns turbocharged.
“The ability to gear is one of the main reasons why I like investment trusts over funds. I have also benefited from some very nice special dividends over the years, particularly from Caledonia. Elsewhere, Henderson High Income has done exceptionally well for me, while I like Witan because it always just chugs along.”
This investor also has some individual stocks, favouring reliable dividend-payers, including
However, due to other commitments, having taken up a new position as president of a sports club, our DIY investor is increasingly preferring outsourcing the stock picking to a fund manager.
“As I have less time to focus on my investments, I have been adjusting the portfolio to become more self-managing.”
In hindsight, he says, “a lesson I have learned over the years is that I should have just stayed with investment trusts over individual shares”.
He adds: “After all, the fund managers have better insight into sectors and the stock market in general than I do.”
However, buying an investment trust at the wrong time can lead to an unsatisfactory outcome. One example cited, which he has now sold, is Smithson Investment Trust Ord
The trust, managed by Simon Barnard, applies the investment philosophy of Terry Smith’s Fundsmith Equity fund, but instead focuses on global smaller companies deemed too small for the original Fundsmith.
While Smithson’s performance in 2023 has picked up, 2022 was a year to forget as its share price dropped 35.2% and the net asset value (NAV) of its companies fell 28.1%. For comparison, the MSCI World Small and Mid Cap Index declined by 8.7%.
Knowing when to call it a day on an investment is viewed by many as harder than hitting the buy button. Some of this stems from behavioural finance biases, including inertia.
Our DIY investor says that the difficulty of knowing when, or whether, to sell “has been my biggest weakness”.
His top tips for other DIY investors is to think long term, be patient, and watch out for fund charges. On the latter point, he says that investors need to always bear in mind that however a fund performs “the fund management firm still gets its fee”. Therefore, it is important to monitor fund performance and assess whether you are getting value for money.
How to decide whether to sell a fund
Among the questions fund managers ask themselves when deciding whether to hit the sell button is whether, over the long term, the drivers for the company are still in place, and whether the valuation has become too rich.
For funds and investment trusts, the same logic applies. First, step back and try to understand why the fund is underperforming.
If it is because the region it invests in, or the investment style, is out of favour, then a period of subdued short-term performance can perhaps be forgiven.
You could view it as a good time to buy more if you think prospects for the region the fund invests in, or the types of shares it holds, will likely improve over time.
However, if it has been a favourable market backdrop for the fund and it has still notably underperformed peers, then investors need to weigh up whether to hold on in the hope that performance improves, or hit the sell button. Ultimately, it is a judgement call that only you can make.
This dull-and-reliable investment offers stability amid stomach-churning volatility This company’s stable share price and attractive cash returns make it favourite for top fund managers
Algy Hall
19 May 2025
Questor is The Telegraph’s stock-picking column, helping you decode the markets and offering insights on where to invest
We all crave fun and excitement. In the stock market, that means dull-and-reliable investments often get overlooked. But during periods of stomach-churning volatility, as we have experienced during 2025 so far, the virtues of the dull stuff suddenly become much clearer.
Dull-and-reliable investments tend to make themselves known through two key attributes. One is relatively stable share prices. The other is attractive cash returns; what could be duller after all than a business with nothing more exciting to do with its cash than to dutifully hand it back to its owners.
US employee benefits specialist Unum displays both these characteristics. This may help explain why top investors have been increasing their bets on its shares.
Nine of the world’s best fund managers, all among the top-performing 3pc of over 10,000 equity pros monitored by financial publisher Citywire, hold Unum’s shares. And increased smart money interest has this month seen the company propelled to be among the 74 constituents that make up Citywire’s Global Elite Companies Index, which represents the very best ideas from around 6,000 stocks held across the portfolios of the world’s best money managers.
Unum is an insurance company that specialises in selling a range of work-related financial protection and wellbeing services through employers and also directly to individuals. Its portfolio includes disability, life, accident, critical illness, cancer, dental and vision cover.
Offering such a broad range of policies makes it attractive as a one-stop-shop to clients, especially as employers increasingly look to compete for staff based on the overall benefits they offer as opposed to just salary.
Unum is more profitable than most of its peers. Its leadership in disability insurance is a particular advantage that underpins its competitive position. The complexities of disability insurance limits competition and differentiates Unum to customers. This is reflected a return on equity of over 20pc reported by Unum in 2024. Meanwhile, book value per share has grown at an annualised rate of 9pc over the last ten years.
The company generates large amounts of cash from its business, too, which it returns through share buybacks as well as dividends. Buybacks have more than halved Unum’s share count since 2007.
Buybacks are only a real benefit to shareholders if the shares bought offer the prospect of a good return. Fortunately, in the case of Unum this looks like the case based on its shares’ forecast free cash flow yield of over 10pc and a price equivalent to less than nine times forecast earnings for the year ahead.
Unum has said it will aim to buy back between $500m (£376m) to $1bn of shares this year and is forecast to pay out over $300m in dividends. Taking buybacks at the proposed mid-point, that’s equivalent to a hearty total shareholder yield (buybacks and dividends as proportion of market capitalisation) of 7.3pc.
British buyers of the shares, which are available through all the UK’s main brokerage platforms, need to fill out the correct paperwork to minimise withholding tax on dividends and should also check for any additional overseas dealing charges.
The company looks particularly well set up for cash returns given there is $2.2bn of liquidity at the holding company level, which is expected to rise to $2.5bn by the year end. That’s well above a target level of about $500m.
The strong financial position has been helped by a reinsurance deal covering a $3.4bn chunk of Unum’s closed book of long-term care insurance policies, equating to 20pc of the total.
Closed books are made up of policies that have previously been sold and are still being serviced but are no longer being marketed. The deal reduces risk as well as freeing about $100m of capital.
Business risks have also been reduced over the last several years by moving the investment portfolio into safer assets.
However, taking on risk is what the insurance game is all about, which means the possibility for upsets always exists. One such recent worry for investors has been an uptick in disability claims in Unum’s first quarter. Management believes this is nothing out of the ordinary, though, and consistent with long-term trends.
More generally, sales growth and premiums are both strong and the company believes digital investments will continue to help it attract new customers while nudging up the persistency of policies that have already been taken out.
There’s plenty to take comfort from. During times of uncertainty, that’s a valuable thing, especially when it is accompanied by large cash returns.
