And can trust investors benefit?

• 05 December 2025
• QuotedData
• David Batchelor

The wreaths are up, and the mince pies are in the oven. And in the investment world too we have our own end-of-year traditions. Foremost amongst these is the “Santa rally”, specifically the old lore that the market invariably performs strongly over the festive period. But is it true? And if so, can trust investors benefit from this seasonal cheer?

Like so many aspects of modern Christmas, the theory of the Santa rally has its origins in America. Personally, I would prefer the more British-sounding Father Christmas rally, but I’m probably just being a Scrooge (or Grinch if you’re American). It was coined in 1972 by Yale Hirsch, founder of the annual Stock Trader’s Almanac, and refers specifically to the final five trading days in December and the first two in January. Since 1950, the S&P 500’s average return during this window has been 1.3%, with the index rising on three quarters of occasions – crucially, this positive hit rate is higher than for a randomly chosen seven-day period.

Nowadays, the term “Santa Rally” is used rather more loosely for any period of strong market performance during Advent, and there is plenty of evidence that the whole of December is generally a strong month for equities. And there is equally strong evidence of a Santa rally effect closer to home. December appears to be the best month of the year for UK equities, with the FTSE 100 delivering positive returns in 24 of the 30 years to 2023, versus 23 for the S&P 500 – although it must be noted that both markets fell over the month last year.

So if the Santa rally does seem to exist (just like the big man himself), what could be the cause? There are numerous hypotheses and there is clearly no one specific answer, but some or all of the following might play a part. Firstly, market volumes tend to be thinner at the end of the year, and if traders are feeling positive as the holidays approach, this can have an outsized impact on prices. Fund managers can also be tempted to “window-dress”, tidying up portfolios before year-end statements, which can mean adding to winners and driving prices higher, and closing out short positions.

This tendency to add to those stocks that have had a good run can also be driven by retail investors influenced by “year in review” pieces highlighting particular winners over the preceding months. Amongst professionals, asset allocation and risk committees slow down in December, which can lead to less appetite to sell into a market that is rising.

If the Santa rally effect is real, at least to an extent, how can investors in investment trusts benefit? The most obvious way is by just sitting tight and waiting for the positive year-end effect to be reflected in fund NAVs. Clearly, trusts with gearing should benefit most, as even a small rally of 1 or 2% is amplified. However, what could make trusts particular beneficiaries is what happens to discounts – opening a path to a possible double boost. For example, in 2023 there was some commentary on an “early Santa rally” coinciding with trust discounts narrowing from much wider levels. And if you manage to buy a trust on an unjustified discount at a time when risk appetite is beginning to improve, a positive year-end could see a mean-reversion of that discount come more quickly than would otherwise be expected.

There are plenty of examples of trusts that look oversold to us, perhaps too many for the Santa rally effect to have a meaningful impact on. That doesn’t mean that these bargains aren’t worth picking up now. Logic would suggest that in time, sanity will prevail (or, in a worst-case-scenario, we’ll see more liquidations).

Towards the end of the year, as is now tradition, QuotedData’s analyst team will be selecting its top picks for 2026 and we’ll also be explaining where we went right and wrong in 2025. Please look out for that.

Going back to Santa and his rally, perhaps the best that can be said for trust investors is to see it as a tailwind, not a strategy in itself. Banking on an unpredictable short-term move in markets is certainly no substitute for understanding the assets, governance, management and strategy of a trust. I have also written previously about the importance of “time in the market” over “timing the market” for investors, and that surely applies here. A strategy of buying and holding quality funds over numerous years is undoubtedly a better bet than trying to be too clever by half and taking advantage of short-term seasonal effects. Indeed, just like with the dogs in those old adverts, a good investment trust is for life (or at least the long term), not just for Christmas.

Results analysis: Octopus Renewables Infrastructure

ORIT’s five-year plan for higher returns.

Alan Ray

Updated 02 Oct 2025

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Octopus Renewables Infrastructure (ORIT). The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

• Octopus Renewables Infrastructure’s (ORIT) half year results to 30/06/2025 show a NAV total return of -0.2% (H1 2024: +2.0%). The lower NAV per share, 99.5p (31/12/2024: 102.6p) mainly resulted from lower power price forecasts, higher discount rates and dividend payments, partially offset by macro factors (e.g. higher UK RPI inflation, lower corporation tax in Finland).
• ORIT’s dividend yield is c. 9.6% (as at 21/09/2025). In the first half dividends totalling 3.08p were on track to achieve the full year target of 6.17p. The target dividend represents a 2.5% increase on 2024’s 6.02p and, in attaining, would extend ORIT’s record of increasing dividends in line with UK CPI inflation to four years . First half dividend cover was 1.19x operating cashflow.
• Revenue of £68.7m and EBITDA of £44.3m were broadly flat year-on-year, although note that in the FY to 31/12/2024 revenues and EBITDA increased by 12% and 16% respectively. 85% of revenues are fixed over the next two years and 47% are linked to inflation for the next ten years.
• ORIT generated 654 GWh of clean electricity (H1 2024: 658 GWh). In a year when wind speeds were lower, ORIT’s diversified strategy demonstrated its value, with an offsetting 34% increase in solar output. This output is equivalent to powering an estimated 158k homes with clean energy (H1 2024: 147K).
• ORIT was geared 47% LTV at the end of the period (89% as a percentage of NAV), a slight increase from 45% at 31/12/2024. The increase was a result of both slightly lower valuations and the impact of share buybacks, both reducing net assets. The board has restated the target to reduce gearing to 40% or less by the end of the financial year.
• A new five-year term loan facility allowed for the repayment of £98.5m of short-term borrowings through the Revolving Credit Facility (“RCF”). The remaining £150m RCF’s term was extended to June 2028. The average cost of debt decreased to 3.6%, from 4.0% as at 31/12/2024. Resulting savings are expected to be c. £850,000 (or 0.15 pence per share).
• Under ORIT’s capital allocation policy, a total of £21.6m (to 15/09/2025) of the £30m targeted share buybacks have been executed. The asset disposal process is on track to deliver £80m of sale proceeds by year end. Selective investments continued, with a total of c. £4.3m of follow-on funding for two of ORIT’s developers and a conditional forward purchase agreement for a price of c. €27m to acquire a sixth site at ORIT’s existing Irish solar complex, Ballymacarney, with completion expected in H2 2026.
• The portfolio’s weighted average discount rate (WADR) increased to 7.9% (31/12/2024: 7.4%), largely due to market conditions, and informed by observed transactions in renewables assets. The introduction of project level debt for UK assets (which replaced some of the more expensive RCF) also contributed to the increase.
• Post period end, ORIT’s board agreed a change in management fees with the manager. Effective 01/11/2025, management fees will be charged on an equal weighting of net assets and average market cap, which at prevailing levels equates to an annualised cost saving of c. £0.7m.
• The board separately announced its ‘ORIT 2030’ strategy, which sets out its four priorities for the next five years.
  • Grow: Invest for NAV growth, deploying capital into higher growth investments, including an increased ~20% target allocation to construction assets, maintaining the current 5% allocation to developers. There will also be a greater focus on asset improvement and disciplined capital recycling.
  • Scale: Target £1 billion net asset value by 2030, to create a more liquid and investable company. Alongside investment growth, this could include corporate M&A.
  • Return: Target medium-to-long-term total returns of 9-11% through a combination of capital growth and income, maintaining the progressive dividend policy, while preserving full cover and targeting long-term gearing below 40%. Retain diversification across core technologies and geographies.
  • Impact: Aim to build approximately 100 MW of new renewable capacity per annum.
• As part of the ORIT 2030 strategy, the board is also recommending that the continuation vote moves to a cycle of every three years, from the current five. The change will be put to a vote at the 2026 AGM, with the next continuation vote then held at the 2028 AGM.
• Phil Austin, chair, said: “ORIT 2030 marks the next phase in the Company’s development. This clear five-year strategy aims to scale ORIT significantly, drive NAV growth through investment into construction and development assets and – underpinned by resilient cash flows – maintain progressive fully-covered dividends.
• “More than 90% of shareholders backed the Company at its continuation vote in June, indicating strong support for ORIT’s future, yet it has also been made clear from our active dialogue with investors that they want the Company to become larger, more investable and to stay true to its purpose. ORIT 2030 addresses this directly with a plan that balances yield, growth and impact, ensuring the Company delivers for shareholders, while supporting the energy transition.
• “With disciplined capital management and the expertise of our Investment Manager, we believe we are well placed to execute ORIT 2030 and to pursue our ambition of building a £1 billion renewables vehicle by 2030.”

Kepler View

As we’ll see further below, Octopus Renewables Infrastructure’s (ORIT) current yield spread over UK 10-year gilts is at a lifetime high, making this a good moment for investors to examine its investment proposition more closely. And while the ‘ORIT 2030’ strategy is clearly meant as the centrepiece of the results, with a separate simultaneous announcement, it’s worth reflecting on some key points of the results themselves. The first of these is the practical demonstration of ORIT’s diversification strategy. In the geography that ORIT covers, wind speeds this year are already known to have been lower, so it is no surprise that ORIT has reported lower output from its wind assets. But wind speed tends to have an inverse correlation to solar output and ORIT’s solar output, up 34%, confirms this, offsetting the lower output from wind. This is a good demonstration of why power grids need different sources of energy generation, and why a trust such as ORIT, targeting a progressive dividend, is assisted by diversification. It’s also notable that ORIT’s short-term debt has partly been replaced with a term loan secured against UK assets, reducing the overall interest cost from 4.0% to 3.5%. If the goal to realise £80m of assets by the year end is achieved, then we can expect a further reduction in the remaining £150m of RCF, which would reduce the overall debt cost further. The revised management fee will also be an incremental cost saving.

The two most immediately practical elements to the strategy in the ‘ORIT 2030’ roadmap are the defined target allocation of owning c.20% in construction assets, and the accompanying increase in the trust’s return targets. It’s worth noting that these do not reflect a change to the investment policy itself. ORIT’s manager has a long track record of asset construction dating back to 2011 and has over 150 professionals with experience at all stages of managing renewable energy infrastructure assets, so this change plays to the inherent capabilities of Octopus Energy Generation. Within ORIT the case study that best illustrates this is the 2024 sale of its fully operational Swedish wind assets for c. €74m, having acquired the assets pre-construction in 2020, with a resulting IRR of 11%.

The focus on reducing costs, noted above, will be important in achieving one of the other goals, to maintain the progressive dividend. Clearly, as ORIT slowly increases to ~20% exposure to non-income producing assets in future, this will mean the balance has to work that much harder. The management team notes that dividend cover will be an important consideration in the decision process to recycling assets, which in simple terms means that lower yielding assets are more likely to be sold and proceeds recycled into construction. The company also reiterated its commitment to a progressive dividend, noting that while increases may not always track CPI in future, this has been achieved in practice, despite never being a formal policy. Further, the revised fee structure, partly calculated on market cap, means the manager’s fee is reduced when there is a discount, aligning the manager’s interests more closely with shareholders. One of ORIT’s other ambitions is to act as a consolidator in its peer group and it seems very likely that earnings enhancement will be a key consideration in the pricing of any M&A transactions that result from this ambition.

Coming back to the present, the chart below shows ORIT’s dividend yield as a spread over 10-year gilts. UK government bond yields have not been playing nice with interest rates this year and are approaching 5%, which accounts for a good deal of the recent price weakness for ORIT, its peers and indeed many other rate-sensitive ‘alternatives’. But as the chart below shows, the spread over gilts is close to a lifetime high for ORIT. With a set of proposals that reduces costs, puts more alignment between the manager and shareholders in terms of addressing the discount and which plays to the manager’s strengths as an experienced constructor and operator, as well as increasing the frequency of continuation votes, we think ORIT’s discount of over 30% seems excessively pessimistic.

YIELD SPREAD OVER GILTS

Source: Morningstar

   Tax disclosure update: as previously announced, the Group received a notice of adjustment from the French Tax Authority amounting to c.€14.2 million, including interest and penalties. The Group maintains its position that this amount is not payable and has formally appealed the decision. This appeal, submitted as a claim to the French Tax Authority, is expected to be reviewed within a six-month period. If the claim is dismissed, the Group would escalate the matter to a formal court process, which could take up to two years to resolve. Based on professional advice, the Board has decided not to make a provision, as they do not believe that an outflow is probable. The Group will continue to monitor the situation and will provide further updates as necessary.

–     Koninklijke KPN N.V. (“KPN”) has provided verbal indication that it will terminate its lease and vacate the Apeldoorn asset at the end of December 2026. The Company continues to work on solutions for the asset including re-letting to a replacement tenant or obtaining planning approval for alternative uses. As previously highlighted, KPN’s anticipated departure is expected to negatively impact the Company’s future income profile. In the event the Investment Manager is unable to fully offset the loss of income from the Apeldoorn asset, the level of future dividends or earnings cover will likely be impacted. An update regarding the Group’s strategy to maximise value from the Apeldoorn property will be provided when appropriate

Here are ten of the highest-yielding investment trusts currently available in 2025, offering strong income potential for investors seeking dividends.

🔝 Top 10 High-Yielding Investment Trusts (2025)

📌 Key Insights

• Credit-heavy trusts like NCYF and HFEL deliver the highest yields but carry interest rate and credit risk.
• Property and infrastructure trusts (AEWU, SUPR, GCP, FSFL) provide stable cash flows tied to long-term contracts, though they are sensitive to property valuations and energy prices.
• Asia-Pacific equity income trusts (HFEL, SOI) benefit from dividend-rich markets in Hong Kong, Singapore, and Australia.
• Alternative assets like Hipgnosis Songs Fund show how investment trusts can generate yield from non-traditional sources such as royalties.

⚠️ Risks to Consider

• Leverage: Many high-yield trusts use borrowing to enhance returns, which magnifies both gains and losses.
• NAV erosion: High payouts can sometimes exceed earnings, leading to long-term capital decline.
• Sector concentration: Property and infrastructure trusts are vulnerable to regulatory changes and economic cycles

Given the Snowball’s fascination with cycles of resilience and decline, these high-yield trusts are perfect case studies. They embody the tension between short-term income allure and long-term sustainability. For your creative projects, you could symbolize them as “Yield Sirens”—tempting investors with high payouts but demanding vigilance against hidden risks.

AI generated information contains many errors so even more critical you DYOR.

SONG no longer quoted, double check the yields.

Price divided by the yearly dividends = yield

Example

SUPR 82p target dividend 6.1p = yield 7.5%

No dividends are 100% secure, all though some are more secure than others.

The sooner you will finish.

Here’s how I pick dividend shares to target a £20k retirement income

Are you considering using the stock market to supplement your retirement income? Our writer examines how dividend shares can help achieve those goals.

Posted by

Mark Hartley

Published 4 December

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. 

If you’re thinking of investing in dividend shares for retirement, you’re not alone. Thousands of Britons do exactly that, with the aim of achieving a steady income stream to supplement their State Pension.

The question is, where and how to start ? Many beginner investors feel overwhelmed by the sheer number of options available. For many, a lack of clarity and understanding leads to fear of losses, and they give up.

Should you buy Legal & General Group Plc shares today?

But with careful planning, patience and commitment, the risks can be minimised and the gains optimised.

A balanced approach

As with everything in life, picking the ideal dividend portfolio requires careful moderation. Choosing all the 10%-yielding stocks might seem logical, until half of them pause their dividends to finance debt.

Choosing all the stocks with the longest track record of payments is wiser — but the average yield might be underwhelming. Anything below 4% is barely outpacing a standard savings account.

A smarter option would be to mix some high-yielders with some reliable dividend heroes — those with decades-long track records. An average yield of 7% is realistic, requiring £285,700 to pay out £20,000 a year in passive income.

A 40-year-old investing £300 a month could reach that amount by age 65 (with dividends reinvested).

Identifying dividend gems

A typical investment portfolio includes between 10-20 stocks from a diverse range of sectors and regions. When it comes to dividends, some of the most popular sectors are finance, utilities, real estate, energy and consumer staples.

Here are two diverse UK dividend shares to consider, each complementing a retirement portfolio in their own way.

Legal & General (LSE: LGEN) has long been a top choice for UK retirement portfolios, offering a combination of high yield and structural appeal. The company operates in life insurance, pensions and asset management — sectors directly tied to retirement savings and long-term demographic trends like population ageing.

The key attraction, of course, is its predictable, dividend-focused cash generation. With a business model that centres around pension risk transfer and workplace retirement solutions, it enjoys recurring revenue streams largely insulated from short-term economic cycles. This close relationship with retirement planning makes it a natural fit for income-focused investors to consider.

The combination of high yield (9%+) and reliable track record make it a rare find — but it’s still at risk from interest rate sensitivity. As an insurance and annuities company, its profitability and solvency are heavily dependent on interest rate movements.

By contrast, National Grid offers a much smaller yield but benefits from more defensive, inflation-linked income. As a regulated electricity and gas supplier, its earnings are set on a multi-year basis. This gives it long-term visibility over cash flows, supporting a dividend policy that grows in line with UK inflation.

The bottom line

When selecting dividend shares, consider balancing yield with sustainability, as higher yields can reflect market concerns about dividend safety. Diversifying across multiple dividend sectors helps manage risk while maintaining steady income streams.

The above options are just two examples of how yield and sustainability can be balanced. There’s a host of similarly attractive UK dividend shares to choose from on the FTSE 100 and FTSE 250. One of the hardest steps is getting started – after that it just requires committed monthly contributions and a big dollop of patience.

VPC Specialty Lending Investments PLC

(the “Company”)

DIVIDEND DECLARATION

The Board of Directors of the Company has declared an interim dividend of 1.44 pence per share in respect of the period to 31 December 2024. The dividend will be paid on 31 December 2025 to shareholders on the register as at 12 December 2025. The ex-dividend date is 11 December 2025. This distribution is necessary to make sufficient distributions so that no corporation tax liability will arise in the Company as noted in the Company’s 2024 Annual Report and Accounts.

The next dividend declaration is likely to be announced in February 2026, then every year thereafter. The dividends will not be less than 85% of net revenue return of the period distributed, as previously disclosed.

The Company has elected to designate all of the interim dividend as an interest distribution to its shareholders, thereby “streaming” income from interest-bearing investments into dividends that will be taxed in the hands of shareholders as interest income.  No income tax will therefore be deducted at source from this, or from future interest distributions.

The Snowball has a position in VPC and will be sold when the balance of cash is returned, the next date is February.

The sale will be at a loss, even allowing for the income earned on £5,345 of re-invested dividends but an un-expected dividend of £180 to be added to the total.

If I could just advise you of just one nugget of investing wisdom today, it would be to NEVER overlook the incredible wealth-building power of dividends.

Few investors realize how important these unglamorous workhorses actually are.

Here’s a perfect example…

If you put $1,000 in the dividend-paying stocks of the S&P 500 back in 1973, you would have had $96,970 by 2023, or 97x your money.

But the same $1,000 in the non-dividend payers would have grown to just $8,990 — 91% less.

That’s why I’m a dividend fan.

The stock market is a fantastic wealth-building machine, but it doesn’t always go straight up!

There have been plenty of 10-year periods where the only money investors made was in dividends.

And that’s what gives us dividend investors such an edge.

When you lock in an 8%+ yield, you’re booking an income stream that’s bigger than the stock market’s long-term average return right off the bat.

Of course you can’t just buy every ticker symbol out there with a flashy yield, or you’ll get burned pretty fast.

So let’s wipe the false promises of mainstream finance from our minds and start thinking the “No Withdrawal” way…