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Anyone who has owned Fundsmith since 2021 has added at least

2 years to their retirement date. It hasn’t effected it’s popularity

though.

In general above the cloud the sun is shining and below

it’s raining on your parade. You do need a price percentage

figure to trade the reversal

It’s a dangerous time to be buying Investment Trusts especially those

that have risen from their lows in a short period of time.

(see watch list below).

If u buy the yield u should be prepared for the long haul

as prices may fall from here next year.

Of course if u are re-investing earned dividends that’s a positive

as u get more shares for your hard earned and a better yield.

As always DYOR, e.g. the yield for RGL is wrong as they recently

trimmed their dividend.

The dividend stream fcast for 2024 is already in excess of the amount u could

receive from an annuity.

If u buy an annuity u have to surrender your capital where with

a dividend stream u keep all your capital, to pass onto

friends/relatives and some for those wee cats and dogs.

The portfolio earned £9,422 in dividends against the target

of £7,000.

The forecast for 2024 is £8,000, a yield of 8% on

seed capital, to be re-invested to earn more

dividends to be re-invested, the snowball effect.

AEI is delivering a sector-leading yield, with low valuations offering strong capital growth potential…

Overview

Manager of abrdn Equity Income Trust (AEI), Thomas Moore, aims to deliver three key goals: provide a high income, provide an income that grows over time, and provide capital growth. To achieve these goals, Thomas has considerable flexibility, allowing him to invest across the UK market cap spectrum with an index-agnostic approach. This allows him to find the best opportunities, that often trade at attractive valuations as they are overlooked by other investors .

The trust is one of the highest yielders in the sector at 7.5%, and the dividends are fully covered by revenue. The manager believes this yield is solidly supported, and its future growth is assured by the diversified portfolio, including the small- and medium-sized companies, and strong underlying revenue growth. Looking forward, Thomas believes a turnaround in macro factors should begin to support a market recovery, with low valuations offering a lot of potential.

Gearing is typically a structural element of the trust and has been used to support the high dividend. The current level is approximately in line with the trust’s neutral level to allow the portfolio to capitalise on the low valuations and support outperformance should the market rebound.

The trust’s Discount narrowed sharply in the past 12 months. The trust traded close to NAV for much of the past year which has enabled the board to issue shares and increase the size of the trust.

Analyst’s View

Thomas has achieved his goal of delivering a very high yield, making AEI one of the best yielders in the sector and delivering a very competitive yield level from equities. He has also delivered another year of dividend growth, which the manager believes is well supported going forward by the underlying portfolio, including the benefits of a diversified portfolio such as holding small- and mid-caps. We understand the dividend growth track record, currently 23 years, is likely to be a key focus of the manager and, in our view, the prospects for dividend growth are strong. We think for those seeking high-income generation from their equity holdings, AEI makes for a compelling offering.

In our opinion, the UK market is significantly undervalued, and this could lead to an improvement in capital returns from the trust. We understand this is now a focus for the manager with the income profile well supported. We believe the trust would benefit from a change in market sentiment, with one ‘bucket’ in the portfolio used specifically for identifying undervalued opportunities. We would expect the small and mid-cap bias to be supportive in any recovery as they typically perform better in rising markets. The differentiation these holdings provide could also help with relative performance.

Furthermore, the high level of structural Gearing could support the trust on the upside should sentiment improve. As such, we believe AEI would be a significant beneficiary of a turnaround in market sentiment and would be well-placed to capture a market rally.

Bull

• Very high covered yield that is delivering growth
• Differentiated portfolio including a bias to small and mid-caps
• Trust has recently reduced its charges

Bear

• Gearing is high which can amplify losses as well as supporting upside potential
• Value-tilted portfolio could struggle in a growth driven environment
• Small and mid-cap bias would likely struggle should a reces

KEPLER

When the Nobel Prize-winning scientist Albert Einstein was asked to identify the most powerful force in the universe, he is said to have replied: “compound interest”. It’s no joke to say that the mathematical phenomenon of compounding or the ability for gains to grow on gains and income to arise from income provides a powerful tool for anyone seeking to accumulate wealth.

However you will need time to make it work

Three stages of a chart, up, down or sideways.