Anglo American PLC on Thursday slashed its interim dividend as rough diamond business De Beers continued to underperform, at the time when the diversified miner is simplifying its business with De Beers one of the operations set to be spun off. Anglo American cut its interim dividend to 7 US cents from 42 US cents, owing to negative earnings from discontinued operations and lack of contribution from De Beers.
Technically SUPR is no longer an Investment Trust but
TRADES ON THE INTERNATIONAL SECURITIES MARKET
Still a strong hold for the Snowball.
Welcome to any new readers. Below are the rules for the Snowball, there are only 3.
One. Buy Investment Trusts and or ETF’s that pay a ‘secure’ dividend and use those dividends to buy more Investment Trusts and or ETF’s that pay a ‘secure’ dividend.
Two. Any share that drastically changes its dividend policy must be sold even at a loss.
The ultimate compound interest example. If held within or outside a tax wrapper all capital gains are tax free. The British Government’s desperate need to borrow your money means it not going to change anytime soon.
If you hold until the 31/01/2028, the government will deem your gilt at £100.00. You don’t need to do anything they will send you your money.
Despite all you may read, it’s a government backed scheme for rich people to avoid paying tax. If you are saving for a special reason, you can work out your payment to the nearest penny. Or if you are nervous about buying high yielding shares as a comfort blanket, if you pair trade.
I am really loving the theme/design of your blog. Do you ever run into any web browser compatibility issues? A number of my blog audience have complained about my website not working correctly in Explorer but looks great in Opera. Do you have any tips to help fix this problem?
One of Warren Buffett’s well-known pieces of advice is: “If you aren’t willing to own a stock for 10 years, don’t even think about owning it for 10 minutes.”
In other words, we will need to regularly invest and be patient. The good news is that this is possible and can lead to a sizeable passive income stream down the road.
Harness the power of compound interest
When it comes to building wealth, compounding is an investor’s best friend. Indeed, Buffett himself admitted that: “My life has been a product of compound interest.”
Specifically, the ‘Oracle of Omaha’ has consistently reinvested the profits from his investments back into the market. This strategy has allowed his capital to keep growing. The longer he holds onto his winning investments, the more they compound, significantly increasing in value.
Indeed, the effect has been so powerful that around 90% of his $135bn fortune was accumulated after the age of 60 (he’s now 93).
While nothing to grumble about, it’s not really a mouthwatering sum. However, if I reinvest my dividends back into buying more shares at the same average price, that £3,500 becomes £38,061 after 30 years
High-quality stock
I’ve chosen this reinvestment strategy with my shares in BBGI Global Infrastructure (LSE: BBGI).
This is a FTSE 250 infrastructure investment company that manages a portfolio of 56 assets across the UK, Europe, North America, and Australia. These include schools, hospitals, toll bridges, motorways, and army barracks.
BBGI earns income from public authorities based on the availability and performance of these assets rather than their usage. This provides the company with predictable cash flows, which in turn has supported consistent and rising dividends.
Now, I should mention that the yield is at a historic high due to the high interest rate environment. This has negatively impacted the value of the firm’s assets and also made building out its portfolio much more challenging. There’s a risk these conditions could persist for some time or even worsen.
Reassuringly though, BBGI says its current portfolio of assets could support rising dividends for another 15 years. That’s music to my ears.
A mighty portfolio
Let’s assume I start from scratch and invest £750 every month into quality stocks like BBGI. Assuming I generate a long-term average return of 8.5% (with dividends reinvested), this is what would happen.
My portfolio would grow to an incredible £1.16m in 30 years (excluding any platform fees)!
If my shares were by this point yielding an average of 7% in dividends, I could be earning £81,303 a year in passive income.
In my view, turning £750 a month into this would be equivalent to building a passive income empire.
The post No savings at 35? I’d follow Warren Buffett and aim to build a passive income empire appeared first on The Motley Fool UK.
19 June 2025
BBGI Global Infrastructure S.A. (“BBGI”)
Announcement of Cancellation of Listing
Further to the announcement made by BBGI on 17 June 2025, BBGI confirms that the listing of the BBGI Shares on the Official List and the admission to trading of the BBGI Shares on the Main Market of the London Stock Exchange were each cancelled with effect from 8.00 a.m. (London time) on 19 June 2025.
It’s possible for ordinary investors to turn a £10,000 lump sum into as much as £150,000. The only catch is that it may take a little patience.
Its ability to grow wealth exponentially over time is nothing short of miraculous. Yet a new survey by Hargreaves Lansdown shows almost three quarters of us underestimate its power.
Joseph Hill, senior investment analyst at Hargreaves Lansdown, said millions fall behind in their retirement plans as a result. “Compound interest has something in common with other wonders of the world. To most people it’s mysterious and beyond comprehension.”
It’s worth taking a little time to understand how this little wonder works. Compound interest can transform relatively small sums into something sizeable. There’s a catch though. It needs time.
Compound interest is the process where the interest you earn on your initial investment also earns interest. Which earns interest too.
This creates a snowball effect, where your money grows at an accelerating rate over the years. Or decades, if you start early enough.
Time is the operative word here. The longer your money remains invested, the greater the compounding effect.
This is a particularly important lesson for younger savers. Many delay investing in their 20s because they have other priorities. Paradoxically that’s the best time to start.
The first £1 you invest is the most valuable of all, because it has longest to grow.
Say someone invests a £10,000 lump sum at 35 and it grows at an average compound rate of 5% a year, after charges.
By age 65, some 30 years later, it will be worth £43,219. It would have grown more than fourfold, which is pretty impressive.
However, if they’d invested the same sum 10 years earlier, at age 25, they’d have £70,399. Their investment term is just 25% longer, but their money is worth a staggering 62% more. All due to compounding.
That’s roughly in line with the long-term total return on the FTSE 100.
After 40 years, they’d have £149,744. That’s almost than double the £70,399 total, yet the annual percentage growth was just 2% more.
Stocks and shares are more volatile in the shorter term, but over longer periods are far better at building wealth.
The average pension saver hopes to retire on an annual income of £48,868, according to new research from Royal London. This includes the full state pension which is currently £11,542.
To generate that in today’s terms, someone retiring at 67 would need a pension pot of around £696,000, with state pension on top.
That’s a daunting sum and inevitably, most will fall short. That’s despite the success of the auto-enrolment workplace pension scheme.
She said a 22-year-old worker who contributed 8% of their £24,000 starting salary into a pension under auto-enrolment rules would have £468,000 by 67, assuming compound growth of 5% a year after fee
That would give them annual income of £36,600, some £12,200 below that £48,868 target. They’d need to invest more to plug the shortfall.
This shortfall highlights a critical issue: while compound interest can significantly grow our wealth, it cannot compensate for insufficient contributions.
Even miracles require a little human intervention. And the earlier the better
SDCL Efficiency Income Trust plc (“SEIT” or the “Company”) Update and Disposal
Following the publication of SEIT’s 2025 Annual Results and Accounts on 23 June, both the Investment Manager and independently the Chair (on behalf of the Board) have met with a number of SEIT’s shareholders to present the results and discuss possible strategic options for the Company.
Feedback emphasised the importance of continued portfolio performance and sufficient cash generation to cover the dividend whilst there was also a consensus around the importance of achieving successful asset disposals with benefits of this including a reduction in debt levels, and the opportunity for returning cash to shareholders in due course.
Accordingly, the Investment Manager has successfully negotiated the sale of its convertible loan in ON Energy to the issuer for $7.6 million, representing an 18.75% premium to the current holding value of $6.4 million and a money on invested capital (“MOIC”) including actual cash receipts to date of 1.63x.
The sale delivers a cash realisation and removes exposure to a business where its geographic focus has shifted away from SEIT’s target markets. The proceeds from the sale will be used to reduce SEIT’s drawings on its revolving credit facility.
Tony Roper, Chair of SEIT, commented:
“The Board remains focussed on finding solutions to narrow the discount the Company’s shares trade at with disposals being key to simplifying the portfolio and reducing debt levels. The Board is taking a more active role in supporting the disposal processes the Investment Manager is working on and will continue to explore all strategic options to achieve these important objectives.”
Jonathan Maxwell, CEO of SDCL, commented:
“The disposal reflects SEIT’s continued focus on crystallising value for shareholders, managing portfolio construction, and maintaining financial flexibility in a challenging M&A market. Our investment in ON Energy has generated attractive returns for SEIT. It is timely to exit as ON Energy moves on to the next stage of its growth and we are pleased to secure an exit at a significant premium as we continue to work hard to create further liquidity and value.”
The prospect of becoming a stock market millionaire can seem exciting, but it need not be daunting. In fact, I think one can aim for a million simply by buying and holding a limited number of well-known and long-established blue-chip shares.
What it takes to go from zero to a million
If one seriously wants to become a stock market millionaire, it takes not just ambition but also a practical plan.
Putting in just a few quid and hoping to stumble on some miraculous once-in-a-generation share will not cut the mustard, I reckon.
Not only is a proper investment strategy required — so is capital. It takes money to make money.
That means that, while it is possible to start with zero, a disciplined regular saving plan is a helpful tool to provide money to invest.
Everyone’s financial situation is different and that will affect how much any one person can invest in their share-dealing account or Stocks and Shares ISA. But the short of it is, the more one puts in, the faster one can aim for a million.
Why doing less can earn more
Imagine an investor puts in £800 each month and was able to grow their portfolio value at a compounded value of 5% annually by investing in 50 leading shares.
Doing that to aim for a million, the investor would be opening the champagne after 38 years.
But imagine if they bought just the 7 or 8 best-performing of those 50 shares and achieved a compound annual growth rate of 10%. They would be a millionaire in 26 years. At 15%, it would take just a couple of decades.
How the top shares perform will vary over time. But the same principle always applies: the best-performing few shares in any group (say, the FTSE 100) over a given time period will outperform the rest.
That can speed things up, perhaps significantly, as in the path towards a million.
That is just simple maths. What is not so simple, alas, is knowing (or even guessing well) which shares will be top performers in any given timeframe.
Going for great, nor merely decent
Many investors know the difference between finding what feels like a really good opportunity and a merely decent one. Great ones can be rare: Warren Buffett pins much of his success on “about a dozen truly good decisions” over many decades.
It can therefore feel tempting to invest in merely decent opportunities. But Buffett’s strong performance comes from being patient and going for brilliant chances in a big way.
I expect demand for oil and gas to stay high. For decades people have been talking about use falling – and I do see that as a risk – but so far it has been resilient, as the global population grows.
Exxon is in prime position to benefit from this. It has a more focussed portfolio than some rivals, outstanding assets, and a proven business model over many decades.
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.
Sometimes people wonder how much they’d need in a portfolio to generate enough passive income to live on. Even though this is an honourable goal, I think it’s often better to flip it around and look at a realistic portfolio size to see how much income it could generate. Based on an investor having built up a £50,000 portfolio over several years, here are my findings.
Setting the tolerance
Risk appetite is a big part of the equation that an investor needs to address. From the beginning of building a portfolio, an investor can choose a low-risk strategy or a higher-risk one. This is reflected in the average dividend yield of the portfolio. As a general rule, the higher the yield of a stock, the higher the associated risk.
The best way to think of it is to consider a stock with a rapidly falling share price. The drop would act to bump up the yield in the short term, potentially to very high levels. Yet, if the business is in trouble, the dividend might get cut. This means the yield wasn’t sustainable at such a high point.
A low-risk approach could be to buy an index tracker that provides the income from all the constituents. However, there’s a middle ground whereby an investor with moderate risk can achieve a higher yield than the index average. Part of this relates to holding a diversified portfolio including many stocks. Then, even if one company hits trouble and cuts the dividend, the overall portfolio isn’t that impacted.
A potential inclusion
One stock that I think worth considering for such a portfolio is the Supermarket Income REIT (LSE:SUPR). The stock is up 8% in the last year, with an attractive dividend yield of 7.7%. The fact that the share price isn’t falling rapidly gives me confidence that the yield isn’t being inflated by this factor.
The REIT makes money by investing in UK supermarket properties and earning rental income from long-term leases with major grocery retailers such as Tesco and Sainsbury’s. It’s an appealing business model, because the contracts are usually set for a decade or more, with rents increasing in line with inflation.
Given the conditions set in order to qualify as a REIT, the trust has to distribute the majority of rental earnings as dividends to shareholders. Although it’s not guaranteed, this increases the likelihood of future dividends.
Some flag up the REITs’ risk of being tied to a small number of larger clients. It’s true that if one of the major supermarkets ended the contract, it would be a significant hit to the company. Yet I see this risk as quite small.
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.
Monetary expectations
If the £50,000 portfolio was built using a middle-risk approach, I believe it could be currently achieving an average yield of 6.5%. This would equate to £3,250 a year. If it were higher risk, I think the yield could be tweaked to 8.5%, paying £4,250 a year. For a low-risk option, the index average of 3.3% would be realistic, offering potential income of £1,640 annually.
The mathematics of capital dividends is simple but surprising.
Alan Ray
Updated 24 Jul 2025
Disclaimer
This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.
One thing I’ve noticed in my parallel life as a mature university student is that sometimes experts struggle to explain concepts because they are so expert in a topic that it’s become second nature. To them, the idea that something needs explaining is akin to having to explain why it’s important to keep breathing. Luckily for me, and annoyingly for my professors, a few years in the City have given me high levels of confidence to ask stupid questions, so we normally get there in the end.
I found myself in a situation recently where the conversation took a turn against the concept of paying capital dividends, with a range of opinions but a consensus that they were a BAD THING. Showing an unusual degree of restraint, I just nodded and moved things along to the next subject, but I did think that’s interesting, I didn’t know people still felt that way. This was probably the right thing to do because in my mind capital dividends are a bit like breathing. Why wouldn’t you pay a capital dividend ? I needed a few hours to get my argument straight, so here goes.
Before we get into things, let’s clear one thing up. It’s a totally valid and successful strategy to invest in companies that pay ‘real’ dividends. The most obvious reason to do so is to collect and spend them, but it may also be because a company’s ability to pay, sustain and grow its dividend says something about its underlying business. There will be many investors happy with the income and growing dividends they receive from UK equity income trusts, exemplified by City of London(CTY) and its extraordinary run of dividend increases (59 years and counting…). And I daresay that many who chose to invest in UK equity income trusts reinvest their dividends. They just like the kinds of companies those trusts invest in. Or let’s think about the £2bn Fidelity European (FEV), not especially high yielding, but the managers place a great deal of emphasis on dividend growth in their stock selection. FEV has a tremendous record of dividend growth and its low-ish yield is a result of its very strong capital growth, which is the ultimate nice problem to have as an income investor.
Capital dividends allow investors to access different strategies which favour other types of companies, and so one might expect performance to have different characteristics. It’s sometimes said that companies that pay steady and growing dividends are mature businesses that have past their best growth years and are happy just continuing on the same path. Investors who bought Microsoft when it started paying a dividend might have cause to disagree with that, but nevertheless, on average that characteristic is rooted in truth, and may well be exactly what an investor likes. Strategies investing in companies with no yield can provide access to businesses at a different stage in their lifecycle, where retaining earnings for investment might result in higher returns. Or, it might just be that in a particular market the culture is different and dividends are seen as less important, and share buy-backs are favoured.
Warning: some mathematics
I’ll preface this by saying that I’m sure that there are those who don’t like capital dividends and who perfectly well understand the following mathematics. For all the financial modelling and big-data AI analysis the industry uses these days, instinct matters in investing, and if that’s a reader’s instinct, I say go with it. But on the chance that a reader hasn’t yet considered the numbers, let’s first walk through a simple example and then some different scenarios.
Let’s take an investment trust with a net asset value of 100p per share, a share price of 90p and thus trading at a discount of 10%. The trust pays a dividend of 4% of net asset value and, to keep things simple, it does it all in one go. In the real world this would most likely be quarterly, but the outcome will be similar.
Now, let’s take an investor who has invested £1,000 at that 90p share price and thus has 1,111 shares and some change left over.
The dividend the trust will pay is [4% x NAV] or [4% * 100p] = 4p per share.
The investor receives a dividend of [£0.04 * 1,111] = £44.44.
Now comes the clever bit. Clearly, one option is to spend the dividend. Perhaps grumbling about how you never wanted a capital dividend in the first place, but still, money is money, right? But what happens if you reinvest it?
Taking the £44.44, the investor buys some more shares at 90p per share. Ignoring stamp duty only for this example, that buys 49 more shares leaving a tiny bit of change.
So, the investor now owns 1,160 shares. The next day the investor is shocked to see that the NAV of the trust has fallen from 100p to 96p. Because the dividend is entirely paid from capital, the NAV is now [100p –4p) = 96p. And, maintaining the discount at 10%, the share price is now 86.4p. This can’t be good, surely?
Before the dividend was paid, the shareholder owned 1,111 shares at 90p = £999.90
After the dividend reinvestment the shareholder owns 1,160 shares at 86.4p = £1,002.24
Let’s go one step further and think about the underlying NAV the investor owns.
Before the dividend was paid, 1,111 shares had an NAV of 100p, so the investor owns £1,111.00 of NAV.
After the dividend was reinvested, 1,160 have an NAV of 96p, so the investor owns £1,113.60.
This last bit is important because NAV is, perhaps obviously, the engine of growth. The investor who reinvests their dividend is getting a slightly bigger engine without putting any more money to work. I won’t torture readers with another maths lesson, but conceptually, the value accretion of an investment trust buying its own shares back is very similar. Think of it like this, the investor has been handed a little piece of the NAV and used it to buy shares at the lower share price.
What does this mean for long-term returns?
Let’s take that maths and put it into an excel spreadsheet and expand it across ten years. Don’t worry though, we’ll just be looking at the chart that results and not diving too far into hypothetical numbers. Scenario A takes that same investor and then sees what happens if they continue to reinvest dividends over ten years. This time, to be pedantic, we have charged them stamp duty each time they reinvest. Maybe in ten years the nonsense of stamp duty on share purchases in the UK will be no more, but that’s another story. Each year, the investment trust’s NAV grows by 10%.
This is pitted against an identical investment trust, except that it does not pay any dividends. The investor simply buys, holds, and gets the same NAV growth rate and the same discount, 10%, persists throughout the ten years.
The chart below shows the value of the two investments. This is the actual value at the share price. That slightly bigger engine we discussed above has, over ten years, opened a slight gap. It is slight but it’s a gap.
Scenario A
Scenario B is identical except that the annual growth rate is negative 10%. Again, the reinvestment strategy works in the investor’s favour, with a slightly higher value, although obviously it can’t protect from a 10% annualised fall in NAV.
scenario B
Both scenarios show that reinvesting capital dividends can, incrementally, increase the value of the investment. The differences are small though, and one might therefore simply conclude that there really isn’t anything to fear from them. We discuss it further on, but the mathematics unravels when a trust trades at a premium, but the unravelling is so slight it’s probably not worth worrying about.
What about selling some shares instead?
There have been many attempts over the years to persuade investors that, rather than seeking dividends, they should consider selling a few shares every year. We know at Kepler that if we put ‘income’ in the title of an event, it will usually be well-attended and so it’s probably fair to say that that technique isn’t widely practised. Space prevents us from running through all the arguments for and against, but broadly it’s the same as for capital dividends: you can own companies that are more focused on growth and might end up better off that way. But since we’ve built a little spreadsheet, we may as well run another scenario, where we take those same two identical investment trusts and look at the returns if one takes an income from them either through capital dividends or by selling shares. Again, the Scenario C chart below shows the value of the investment over a decade, and again, the capital dividend gives a better outcome. In this case, an identical amount of income has been taken and spent elsewhere for both trusts, and the chart is plotting the remaining value of the shares.
With more on discounts and premiums below, for this specific scenario, we’ll just say that it will be better to sell shares on a premium to raise income rather than receive a capital dividend. But if a discount persists, the difference is actually a little more compelling than in the first two scenarios.
scenario C
What about discounts? And premiums?
There’s a danger once you’ve built a spreadsheet to prove a simple point that you dive off into dozens of other scenarios and lose sight of the main conclusion. Further, the more variables built into a model, the more the result becomes opinion. So, we’ve avoiding modelling narrowing discounts, or volatility or any of the other discount-related factors and just kept our discount at a constant to illustrate the underlying maths of reinvesting capital dividends. But let’s briefly think about discounts. In our example above we have two investment trusts only distinguished by their dividend policy. Over a ten-year period, which one is more likely to see its discount narrow? I think if a trust is paying a dividend, it will increase the chances it attracts more investors. But even if it doesn’t, if some of its existing investors automatically reinvest their dividends, then this creates slightly more demand for the shares. The golden answer to the age-old question ‘how do you narrow a discount?’ is to create more demand for the shares. So, I think, absent other factors such as good marketing, the trust paying the capital dividend has a higher probability of narrowing its discount.
This leads to the next question, which is if a trust goes to a premium, how does the maths of reinvesting dividends work then? The straightforward answer is that it doesn’t, because the investor is then, in effect, being handed a little piece of the NAV and using it to pay a higher price for the shares. I would make three points though. First, the discount has narrowed from 10% and then gone on to a premium. The returns generated from that will vastly outweigh the little compounding effect of dividend reinvesting and that’s a cause for celebration. Second, one can choose to stop reinvesting dividends at that point. Spend the money or reinvest it in something else. Third, history says that most investment trusts are much better at limiting premiums to low single digits than they are discounts. The maths of reinvesting a capital dividend at a tiny premium is, technically, unappealing, but the numbers are so small it’s probably not worth worrying about it. But of course, it’s one more thing to keep an eye on.
Let’s clear something up about revenue reserves
If none of that leaves readers persuaded, let’s think about it a different way. One of the oft-cited advantages of investment trusts are their ability to smooth dividends, using revenue reserves. I think this is, uncontroversially, a good thing. But know this. Revenue reserves are not, as the name perhaps implies, a stash of cash in a bank account. When an investment trust transfers some of its income to reserves, it becomes part of the net asset value, invested in the same portfolio. There is no special ring-fenced area where reserves are held. Revenue reserves are an accounting construct that keeps track of how much income the trust has received but hasn’t distributed, but the money is invested just like all the other money. So, if one purchases an investment trust with a large revenue reserve, that value is in the NAV and by extension the share price. So, the same argument that naysayers apply to capital dividends applies: the investor is being given money back that they’ve paid for. The difference is that the original source of that money was from portfolio company dividends, and again, that’s something that might matter to an investor. But if an investment trust with an NAV of 100p pays a dividend of 1p from revenue reserves, then the NAV is now 99p. Just like a capital dividend. Happily, all the other positive maths we’ve explored above also applies.
A few of the good ones…
Many investment trusts pay capital dividends and that tells us something important. While there are those investors who don’t like them, many do and are happy to receive them whether they have created an excel spreadsheet to prove they work or not. A portfolio built for income can only be helped by some diversification into key areas that, without capital dividends, an investor might not be able to access. This year, European equities have notably outperformed US equities and one of the strongest performing trusts in the Europe sector, JPMorgan European Growth and Income (JEGI) pays a dividend equivalent to 4% of NAV. JEGI’s objective is to be a risk-controlled ‘core’ investment and so although it does not seek out dividend paying companies, it is managed in a way that may well align with conservative equity income investors. In the adjacent European Smaller Companies sector, the aptly named European Smaller Companies (ESCT) is in the process of adopting a capital dividend policy paying 5% of NAV. In keeping with the times, ESCT is absorbing one of its smaller rivals, European Assets (EAT), which holds the record as the longest-running capital dividend payer and ESCT is adopting a similar policy, set at 5% of NAV. This will be a great way to get access to one of the best smaller companies trusts there is while receiving a dividend. Income investors who feel they are shut out from the long-term growth of China could do well to look at JPMorgan China Growth & Income (JCGI), which pays a dividend at the 4% of NAV rate. And drilling into more specific sectors, International Biotechnology (IBT) also pays a 4% dividend, and Polar Capital Global Financials (PCFT) has very recently adopted the same policy, again providing income investors with something they might otherwise not be able to access.
In conclusion
The elephant in the room is that capital dividends are not progressive dividends that gently increase each year, and an income investor needs to think about that. But in building a portfolio of several income trusts, the risk that the capital dividend might fall in a given year is balanced by the fact that it equally might increase significantly. The basic premise of investing in equities is, in any case, that their value rises over time, so taken on a ten-year view, one might see shorter-term volatility as a risk worth taking. The other, perhaps less expected, conclusion is that for investors who don’t care at all about dividends, buying a trust on a discount that pays a capital dividend might be a good thing, partly for the maths we explore above and partly for the increased probability of discount narrowing. Really, it’s as simple as breathing.
