Supermarket Income REIT PLC, announces that on 16 May 2024, that Benedict Green and his PCAs acquired 330,179 Ordinary Shares in the Company (£250,010.)

If I was starting a high-yield dividend stock portfolio today, here are 3 shares I’d buy.
High-yield dividend stocks can be a great way to generate income. But it can pay to be selective when building a portfolio of them.

Edward Sheldon, CFA

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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Building a high-yield dividend stock portfolio sounds easy, in theory. In reality however, it can be quite challenging as stocks with high yields sometimes end up producing disappointing overall returns.

Here, I’m going to highlight three shares I’d buy if I was starting a high-yield portfolio today. These shares aren’t the highest yielders in the market however, I see them as attractive from a risk/reward perspective.

A low volatility stock
If my goal was income, one of my first picks would be National Grid (LSE: NG.), the gas and electricity company that operates in the UK and the US.

The main reason I’d go for this stock is that demand for electricity and gas is unlikely to fall off a cliff any time soon. So I’m unlikely to experience catastrophic losses owning it.

I also like the fact that the shares have a very low ‘beta’ of 0.40. This means that for every 1% move in the UK stock market, they only move around 0.40%.

When it comes to dividends, National Grid’s a reliable payer. For 2024, it’s expected to pay out 58.2p per share. At today’s share price, that translates to a yield of about 5.2%. That’s not spectacular, but it’s decent.

A risk is interest rates. If they were to rise from here, National Grid’s share price could fall since the company has a lot of debt on its books.

I think it’s more likely that rates will go down and not up in the years ahead though. So I see the backdrop as favourable.

Long-term growth
Another company I’d go for is banking giant HSBC (LSE: HSBA). One of the largest businesses on the London Stock Exchange today, I see it as a blue-chip stock.

Now, bank stocks like HSBC can be a little risky. That’s because banking’s a cyclical industry.

But I like the long-term story here. In recent years, HSBC has positioned itself to benefit from higher growth areas such as Asia and wealth management. So in the long run, it looks capable of providing attractive overall returns.

As for dividends, the yield here is a little complex because HSBC’s paying a special dividend this year.

For 2025 however, it’s expected to pay out 61.9 cents per share. At today’s share price, that equates to a yield of around 7%, which is no doubt appealing.

I’ll point out however, that HSBC’s looking for a new CEO. And whoever gets the top job could potentially decide to lower dividend payments.

A clean energy play
Last but not least, I’d go for The Renewables Infrastructure Group (LSE: TRIG). It’s an investment company that owns a portfolio of clean energy assets.

Again, I like the long-term story here. In the years ahead, the clean energy theme is only likely to become more prevalent. So I think this company’s capable of providing attractive returns.

Lower interest rates should help. Over the last two years, the company’s share price has fallen as rates have risen. So lower rates could lead to a rebound.

This year, management’s targeting a dividend payment of 7.47p. At today’s share price, that equates to a yield of around 7.3%.

As always though, dividends are never guaranteed. If the company’s cash flows were to fall due to lower power prices, income may be lower than anticipated.

Questor: this investment fund outperforms the global index

Questor Wealth Preserver: time to switch from the Invesco bond fund to the stock market

The Telegraph

Robert Stephens18 April 2020

Buying a global stock market tracker fund is arguably the simplest way for any investor to obtain an inflation-beating return over the long run. The MSCI AC World Index, for example, has generated an 11.5pc annualised return over the past decade.

Over the same period, inflation has amounted to around 2.9pc per year on average. 

Given the stunning historical performance of shares in real terms, Questor is shifting the focus of its Wealth Preserver portfolio towards the stock market. Although shares are significantly more volatile than other asset classes over the short run, our inherent long-term focus and willingness to tolerate temporary fluctuations in market values means they should be the focal point of our portfolio.

However, rather than simply purchasing a range of tracker funds, companies such as JPMorgan Global Growth & Income will instead be added to our portfolio.

After all, the investment trust has comfortably outperformed the MSCI AC World Index, which is its benchmark, over recent years. 

For example, over the past decade it has produced a 15.3pc annualised return. This is 3.6 percentage points greater than the annualised return of the wider index.

JP Morgan Global Growth & Income has also been a strong performer since originally being tipped by this column in April last year. Its share price has risen by 22pc, versus a 3pc gain for the FTSE 100 index, as the US stock market has surged higher. 

Indeed, US-listed equities account for roughly 68pc of the trust’s assets. This is four percentage points higher than its benchmark and highlights the dominance of the US stock market on the global stage.

Although growing levels of debt and elevated political uncertainty, alongside heady valuations for some stocks, suggest the US stock market’s growth potential is now somewhat more limited than it was a year ago, an ongoing strong economic performance and the prospect of interest rate cuts mean further capital gains are likely to be ahead for investors. 

While the trust’s shares trade at a 2pc premium to net asset value and it currently does not employ gearing at a time when other companies offer wide discounts and utilise substantial borrowings to magnify their returns, its track record of outperformance suggests it remains a sound long-term option.

Well-known businesses such as Microsoft, Amazon and Nvidia are among the trust’s largest holdings in a portfolio that typically numbers between 50 and 90 stocks. 

Although it has the aforementioned overweight position in US-listed equities, as well as a four percentage point underweight to Japan’s stock market, the trust uses a bottom-up strategy that is not driven by a company’s listing location or sector. 

This means its performance could materially differ from that of its benchmark, which in Questor’s view is ultimately the whole point of investing in actively managed funds. Otherwise, a tracker fund would produce a very similar result at a potentially lower cost and with significantly greater diversification.

Despite its large exposure to the low-yielding US stock market, the company’s dividend yield currently stands at a respectable 3.1pc. 

Its shareholder payouts have risen by 8pc per annum on a per share basis over the past four years, thereby making it a very realistic income investing option, with the company aiming to pay out at least 4pc of its previous year’s NAV as a dividend each year. 

 

Given the stock market’s long-term track record of delivering strong growth on a real terms basis, it is logical for equities to become an increasingly dominant part of our portfolio. 

The JPMorgan Global Growth & Income investment trust has a highly attractive track record against the global index and yet still trades at only a modest premium to NAV and it is a likely beneficiary of upcoming interest rate cuts in the US. It will now be added to our Wealth Preserver portfolio.

Questor says: buy

Ticker: JGGI

Share price at close: 546p

££££££££££££££££

Alan Oscroft

When times are tough, like we saw in the pandemic and stock market crashes… people sell shares. When times are good and stock markets are booming… people buy shares.

Isn’t that the wrong way round? Don’t we want to buy shares when they’re low and sell when they’re high? I know I do.

DYOR as this years leaders may be next years laggards.

The holy grail of investing a Trust that pays u a dividend and sits in your account at nix, nada, nothing, if u took out your stake and re-invested it in a higher yielder.

Dividends earned but not re-invested in back into JGGI. A trust to consider if u are in the accumulation stage, if/when Mr. Market gives u the chance to buy. To grow your Snowball it would have to be pair traded with a higher yielder.

The Income portfolio, there were fewer big movers as the model portfolio advanced to a price return of 8.77% since its launch in mid-November of last year – dividends paid will have added at least another 2.5% to that price return. Yet again, the star performer was the global utilities and infrastructure fund Ecofin Global, which has been up 8% over the last month and 19% since the model portfolio launched. Ecofin. It helped that interest rates and 10-year bond yields rose in April, as did listed infrastructure stocks led by utilities, with low valuations and solid earnings reports. The fund reports that the global utility index and EGL’s NAV have now outperformed the MSCI World Index over three months, almost entirely owing to US constituents of the portfolio “which are beginning to be recognised as future beneficiaries of the datacentre and AI power needs” become obvious to investors. This defensive fund is now up 21% over the last six months.

The Definitive Dividend Hero

20 investment companies made it onto the AIC’s list of this year, two more than 12 months ago. But based on number of years of growth, level of dividend yield and 5-yr dividend growth rate, which comes out top?

By Frank Buhagiar

Back in Q1 2024, the Association of Investment Companies (AIC) published its latest list of Dividend Heroes – those investment companies that have increased their annual payouts for at least 20 consecutive years. No mean feat considering the last two decades have seen a pandemic, a financial crash and a European sovereign debt crisis. While all funds on the list are to be commended, to continue to qualify as a Dividend Hero and maintain a track record of 20 plus years of growth, a trust, in theory, only has to raise its payout by the smallest of margins. And then again, if a Hero’s dividend yield is relatively small, how valuable is it to investors looking for income to help tackle the cost-of-living squeeze? We thought we’d repeat the exercise we carried out last year and look to identify which fund is the definitive Dividend Hero.

The Heroes

First, the AIC’s latest list of Dividend Heroes:

Investment Trust	AIC Sector	Number of Consecutive Years Dividend Increased	Dividend Yield (%)	5-year Annualised Dividend Growth Rate (%)
City of London	UK Equity Income	57	5.12	2.58
Bankers	Global	57	2.31	5.36
Alliance	Global	57	2.10	13.20
Caledonia Investments	Flexible Investment	56	2.06	3.41
The Global Smaller Companies	Global Smaller Cos.	53	1.50	9.82
F&C Investment Trust	Global	53	1.50	5.97
Brunner	Global	52	1.78	4.58
JPMorgan Claverhouse	UK Equity Income	51	5.18	4.64
Murray Income	UK Equity Income	50	4.57	2.43
Scottish American	Global Equity Inc	50	2.83	4.16
Witan	Global	49	2.48	5.14
Merchants	UK Equity Income	41	5.24	2.16
Scottish Mortgage	Global	41	0.52	5.96
Value and Indexed Property Inc	Property – UK Com	36	7.13	2.50
CT UK Capital & Income	UK Equity Income	30	3.90	2.10
Schroder Income Growth	UK Equity Income	28	5.21	3.18
abrdn Equity Income	UK Equity Income	23	8.42	3.50
Athelney Trust	UK Smaller Cos.	21	5.37	1.49
BlackRock Smaller Companies	UK Smaller Cos.	20	2.95	9.00
Henderson Smaller Companies	UK Smaller Cos.	20	3.29	4.36

Source: theaic.co.uk / Morningstar. Correct at 08/03/24.

A Couple of Observations

The list has grown. Twelve months ago, 18 funds made it onto the list. Fast forward a year and the complement of Heroes now stands at 20, courtesy of new entries BlackRock Smaller Companies and Henderson Smaller Companies.

With seven names, the UK equity income sector is the largest contributor to the list and half of the Heroes have now raised their dividends each year for half a century or more.

We have our heroes. Now, to rank them.

The Definitive Dividend Hero

20 investment companies made it onto the AIC’s list of Dividend Heroes this year, two more than 12 months ago. But based on number of years of growth, level of dividend yield and 5-yr dividend growth rate, which comes out top?

By Frank Buhagiar

Degrees of Heroism

Quick refresh of the ranking process. Heroes are something of a mixed bag. Some trusts have notched up 50 plus years of dividend growth but have relatively small yields. Then there are those that boast higher yields but have shorter track records of consecutive annual dividend growth. There are also those trusts that have relatively small yields but above average dividend growth rates. Begs the question, which is more valuable – longevity, level of payout, or growth rate?

For the purposes of this exercise, equal weightings are attached to the three right-hand columns on the AIC list – ‘Number of consecutive years dividend increased’; ‘Dividend yield (%)’; and ‘5-year annualised dividend growth rate (%)’.

In terms of the scoring system itself: the higher the number of years of consecutive dividend increases, dividend yield and 5-year annualised dividend growth rate, the higher the trust scores. The trusts are ranked based on their relative standing in each of the three columns with the highest ranking ascribed 20 points (20 trusts in the pool). For example, the two newbies, BlackRock Smaller Companies and Henderson Smaller Companies receive the lowest points in the longevity category as they have ‘only’ increased their payouts for 20 consecutive years. City of London, Bankers and Alliance have the longest track records and so collect the full 20 points on offer.

The trust with the highest score wins the day and we have the ‘Hero of Heroes’.

The Scores

The table below includes the AIC’s original list with the results of the scoring system in brackets:

Investment Trust	AIC Sector	Number of Consecutive Years Dividend Increased	Dividend Yield (%)	5-year Annualised Dividend Growth Rate (%)
City of London	UK Equity Income	57 (20)	5.12 (14)	2.58 (6)
Bankers	Global	57 (20)	2.31 (7)	5.36 (15)
Alliance	Global	57 (20)	2.10 (6)	13.20 (20)
Caledonia Investments	Flexible Investment	56 (17)	2.06 (5)	3.41 (8)
The Global Smaller Companies	Global Smaller Cos.	53 (16)	1.50 (3)	9.82 (19)
F&C Investment Trust	Global	53 (16)	1.50 (3)	5.97 (17)
Brunner	Global	52 (14)	1.78 (4)	4.58 (12)
JPMorgan Claverhouse	UK Equity Income	51 (13)	5.18 (15)	4.64 (13)
Murray Income	UK Equity Income	50 (12)	4.57 (13)	2.43 (4)
Scottish American	Global Equity Inc	50 (12)	2.83 (9)	4.16 (10)
Witan	Global	49 (10)	2.48 (8)	5.14 (14)
Merchants	UK Equity Income	41 (9)	5.24 (17)	2.16 (3)
Scottish Mortgage	Global	41 (9)	0.52 (1)	5.96 (16)
Value and Indexed Property Inc	Property – UK Com	36 (7)	7.13 (19)	2.50 (5)
CT UK Capital & Income	UK Equity Income	30 (6)	3.90 (12)	2.10 (2)
Schroder Income Growth	UK Equity Income	28 (5)	5.21 (16)	3.18 (7)
abrdn Equity Income	UK Equity Income	23 (4)	8.42 (20)	3.50 (9)
Athelney Trust	UK Smaller Cos.	21 (3)	5.37 (18)	1.49 (1)
BlackRock Smaller Companies	UK Smaller Cos.	20 (2)	2.95 (10)	9.00 (18)
Henderson Smaller Companies	UK Smaller Cos.	20 (2)	3.29 (11)	4.36 (11)

The Final Table

With scores totted up:

Investment Trust	Number of Consecutive Years Dividend Increased	Dividend Yield (%)	5-year Annualised Dividend Growth Rate (%)	Overall Score
City of London	20	14	6	40
Bankers	20	7	15	42
Alliance	20	6	20	46
Caledonia Investments	17	5	8	30
The Global Smaller Companies	16	3	19	38
F&C Investment Trust	16	3	17	36
Brunner	14	4	12	30
JPMorgan Claverhouse	13	15	13	41
Murray Income	12	13	4	29
Scottish American	12	9	10	31
Witan	10	8	14	32
Merchants	9	17	3	29
Scottish Mortgage	9	1	16	26
Value and Indexed Property Inc	7	19	5	31
CT UK Capital & Income	6	12	2	20
Schroder Income Growth	5	16	7	28
abrdn Equity Income	4	20	9	33
Athelney Trust	3	18	1	22
BlackRock Smaller Companies	1	10	18	29
Henderson Smaller Companies	1	11	11	23

A Quick Reordering

And we have a final table of heroes ranked in terms of heroism with last year’s scores/rankings in brackets:

Investment trust		Score		Ranking
Alliance		46 (43)		1 (1)
Bankers		42 (35)		2 (4)
JPMorgan Claverhouse		41 (39)		3 (2)
City of London		40 (38)		4 (3)
The Global Smaller Companies		38 (33)		5 (6)
F&C Investment Trust		36 (29)		6 (9)
abrdn Equity Income		33 (35)		7 (5)
Witan		32 (32)		8 (8)
Scottish American		31 (29)		9 (10)
Value and Indexed Property Inc		31 (27)		10 (12)
Caledonia Investments		30 (27)		11 (11)
Brunner		30 (32)		12 (7)
Murray Income		29 (23)		13 (14)
Merchants		29 (24)		14 (13)
BlackRock Smaller Companies		29 (-)		15 (-)
Schroder Income Growth		28 (22)		16 (15)
Scottish Mortgage		26 (17)		17 (18)
Henderson Smaller Companies		23 (-)		18 (-)
Athelney Trust		22 (17)		19 (16)
CT UK Capital & Income		20 (17)		20 (17)

The Definitive Dividend Hero

For the second year in a row, Alliancesits atop of the tree.  Bankers jumps two places to second from fourth last year. JPMorgan Claverhouse and City of London both drop one place to third and fourth respectively. Mention in dispatches goes to Scottish Mortgage for the largest points increase – 17 to 26. Ditto for biggest climb up the rankings, F&C Investment Trust from ninth to sixth. And for strongest newcomer BlackRock Smaller Companies in 15th place.

Of course, all the funds that make it on to the AIC’s list are heroes. Sadly, only one can be the winner and that’s Alliance, whom we sat down with for an update earlier this month.

The Results Round-Up – The Week’s Investment Trust Results

Which shareholders are being paid to wait for a lasting recovery in income stocks thanks to an 8.3% dividend yield? And UK small and medium-sized company valuations “remain incredibly attractive” according to one Chairman, but who said it? Find out in this week’s round-up.

By Frank Buhagiar

BlackRock Smaller Companies’ (BRSC) one inescapable truth

BRSCoutperformed its benchmark during the full year despite reporting a -3.6% decline in NAV per share for the year. That’s because the Deutsche Numis Smaller Companies plus AIM Index (excluding Investment Companies) fared worse, ending the period down -5.8%. As for share price total return, this almost finished the year in positive territory (-0.8%). Relative performance stacks up over the longer-term too. According to Chairman Ronald Gould’s full-year statement, £1,000 invested in BRSCon 28 February 2006 would have grown in value by +421.5% in NAV terms by 29 February 2024. That compares to just +150.7% had that £1,000 been instead invested in the ‘UK open-ended income sector median’.

What’s more, since year end the fund has recovered lost ground despite ‘continued and significant market volatility’ – NAV (as at 8 May 2024) is up +8.0%, once again beating the benchmark’s +7.8%. A thumbs up then for the strategy to weight the portfolio towards companies with well capitalised balance sheets and entrepreneurial management teams that are able to rapidly adapt their businesses to the shifting market dynamics. For those searching for the one inescapable truth, the investment managers have the answer – UK small and medium-sized company valuations remain incredibly attractive. Perhaps should have made it clear the one inescapable truth related to financial markets in this instance. The search for the truth goes on.

JPMorgan: “BRSC has underperformed the index TR since late 2021 but has partially reversed that underperformance in the past year. BRSC, like most of its peers, has a growth style bias which likely has been a significant factor in performance. We feel our Neutral recommendation for BRSC remains fair.”

abrdn Equity Income’s (AEI) dependable income

AEI’s NAV total return of +1.6% for the half year fell short of the FTSE All-Share Index’s +6.9%. Chair Sarika Patel puts the underperformance down to income stocks being overlooked in favour of growth companies during the latest half year. Encouragingly, towards the end of the period, a noticeable shift towards value names was observed which coincided with a recovery in our relative performance. Helpfully, investors are being paid to wait for a lasting recovery in income stocks – as at 31 March 2024, the shares were offering a dividend yield of 8.3%. And according to Patel, the yield is based around dependable income, always useful as a high proportion of the total return generated by UK equities over time has come from dividends.

In his outlook statement Portfolio Manager, Thomas Moore, managed to fit in a weather forecast, “we are now increasingly confident that the clouds that have existed for some time are now dissipating, with many of our holdings now delivering on the investment thesis we originally anticipated at the time of purchase.” Here’s to blues skies and sunnier days ahead.

Winterflood: “Largest sector exposures at period-end were Financials (36% of portfolio value), Energy (16%) and Industrials (11%). Net gearing at period-end was 12.5% (30 September 2023: 11.3%). Manager has re-focused portfolio positioning towards stocks where he sees potential for combination of dividend yield, dividend growth and valuation re-rating.”

Polar Capital Global Healthcare (PCGH) expecting more of the same

PCGH posted a double-digit NAV per share return for the latest half-year period. The +16.55% return for the six months under review easily beat the +9.56% clocked by the MSCI ACWI/Healthcare Index (total return in sterling with dividends reinvested). That means NAV per share is now up +95.3% since the fund was restructured in June 2017, once again comfortably ahead of the benchmark’s +81.88%. In their half-year review, the investment managers cite strong stock selection as the reason for the latest bout of outperformance.

And the investment managers are expecting more of the same. They believe the sector’s key growth drivers including innovation, emerging markets and artificial intelligence along with rising demand will continue to drive revenue and earnings growth, along with outperformance, in the years ahead.

Winterflood: “Discount narrowed slightly from 7.7% to 6.7%. Outperformance driven by stock selection. Over the period, exposure to healthcare facilities was reduced to take profits, while biotechnology exposure was increased.”

Baillie Gifford European Growth (BGEU) waiting for the love to return to Europe

BGEUput in a strong showing over the half year – NAV total return came in at +20.2% compared to a still impressive +14.9% from the FTSE Europe ex UK Index (sterling). The share price beat the index too, rising +18.5%. The Interim Management Report admits that, as with other growth investors, rapidly rising inflation and interest rates have been painful. But the managers have been proactive, getting rid of weak companies and capitalising on low valuations to pick up competitively advantaged ones. They’ve also taken the opportunity to add to long-term winners that are currently facing challenges, albeit temporary ones.

The investment managers think there’s more to come too. In their view Europe is unloved and because of that there is the chance to pick up resilient companies offering significant long-term upside on sale. According to the investment managers ,“it feels like a better time to be a long-term European growth investor than it has for several years.” Just need Europe to start feeling the love now.

Numis: “The fund provides exposure to fast-growing European companies, and also benefits from opportunities to invest in unquoted assets through the Baillie Gifford network, with a maximum allocation of 20% (currently c.10%). Style headwinds have dampened medium-term performance, and since Baillie Gifford took over management the fund has produced NAV total returns of 32.8% (6.5% pa), compared with 43.3% (8.2% pa) for the index.”

IF the current market strength continues, one way of trading would be to buy a 250 tracker. XMCX pays a variable yield of around 4% so if u wanted to lesson the risk u would need to pair trade it with a higher yielder, maybe property as the current values are nearer their low from their high. But as always best to DYOR as there are still plenty of other Trusts trading at above market yields.