With £20k, here’s how I’d target a £23,800 passive income every year.
Fact one, if u intend to use the 4% rule (see below) it’s not strictly passive income, because u are relying on the market not to crash and we all know it does on a regular basis.
If u invest 20k at 7% compounded after 40 years your dividends would equate to £23,800 a year.
Of the course over 40 years there may be some years u will not be able to re-invest at 7%, currently u can beat the target income but the total is not in doubt just the time frame.
With £20k, here’s how I’d target a £15,919 passive income every year
Story by Royston Wild
Share investing can provide a wealth of opportunity for individuals to create a lifelong passive income. Few asset classes have provided the sort of return that equities have since the second half of the 20th century.
However, there are a few golden tips investors can follow to try and build long-term wealth. If I had a £20,000 lump sum to invest, here’s what I’d do to try and achieve a near-£16k passive income for the rest of my life.
Topple tax
My first act would be to buy assets using a tax-efficient financial product. In the UK, we’re talking about an Individual Savings Account (ISA) or a Self-Invested Personal Pension (SIPP).
The annual allowances for these products are pretty generous at current levels. The limit for ISA investments is £20,000. For the SIPP, it is typically an individual’s annual earnings, or £60,000, whatever is highest.
A major SIPP drawback is that individuals can’t make withdrawals until their late 50s. However, for those saving for retirement this may not necessarily be a problem. What’s more, pension holders also receive a healthy dose of tax relief.
Tax on capital gains and/or dividends is the biggest investing-related expense any of us will pay. So investing in an ISA or SIPP can save each of us a huge wad of cash over the long term.
Spread out
The other thing I’d do is create a balanced portfolio of investments.
One way to achieve this is by investing in an exchange-traded fund (ETF) that spreads capital across a wide range of instruments. These can include stocks, bonds, commodities, and cash.
The iShares Growth Portfolio UCITS ETF (LSE:MAGG) is one multi-asset fund I’d happily buy today. More than 85% of its capital is currently invested in shares, the majority of which are listed in the US. Major underlying holdings here include Nvidia, Microsoft, Apple, and Amazon.
The remainder of the ETF’s money is locked into fixed income securities like government bonds. This 85-15 split across asset classes — combined with its strategy of investing in shares across the world — has helped investors achieve supreme capital appreciation, while also building in a level of risk management.
A ~16k passive income
Since its inception in 2020, the product has delivered an annualised return of 7.5%. If this were to continue, a £20,000 investment today would — excluding trading and management fees — turn into £397,978 after 40 years.
This could then provide a regular passive income of £15,919 if I drew down 4% each year.
Of course, future returns are never guaranteed. And in the case of this ETF, a slowdown in the US stock market could impact the passive income I make. But on balance, I think diversifying like this is an important and valuable strategy.
The post With £20k, here’s how I’d target a £15,919 passive income every year appeared first on The Motley Fool UK.
The filtered list for research, note the header is now fall from high, from increase from low. Is the dividend more important in a falling market than majoring on any discount to NAV ? It’s your hard earned, so your decision.
SMIF of interest as they pay a monthly dividend but the final yield is dependant on the final dividend which is variable.
That’s one option, u can buy an annuity paying around 7% and if u die within a few years the capital will form part of your estate, if not hard luck. U of course have to kiss goodbye to your capital.
Another option is to buy a portfolio of ‘secure’ paying Investment Trusts, currently yielding 8% plus and u retain all your capital. As long as u don’t sell the golden geese it should continue to lay golden eggs until u cross the bar. Different strokes for different folks.
Regional REIT Limited (LSE: RGL), the regional property specialist, announces the following trading update for the quarter from 1 April 2024 to 30 June 2024.
Summary of activity in the quarter to 30 June 2024
Lettings
Since 1 April 2024, the Group has made strong progress on lettings, exchanging on six notable leases to new tenants totalling 69,067 sq. ft., amounting to £0.7m per annum (“pa”) of rental income when fully occupied, achieving an average rental uplift of 11.0% against December 2023 ERVs. A further seven leases have renewed amounting to 47,000 sq. ft. and £0.6m pa of rental income.
Sales
Three disposals (plus one part sale) were completed in the quarter to 30 June 2024 with sales proceeds amounting to £6.9 million (before costs), reflecting a net initial yield of 9.6%.
Stephen Inglis, CEO of London & Scottish Property Investment Management, Asset Manager commented:
“During the quarter we were pleased to achieve further progress in the Group’s letting activity and disposal programme, with £0.7m of additional notable rental income from new leases and £6.9 million generated from recent disposals.
As announced on 18 July 2024, the successful capital raise of £110.5m ensures the repayment of the retail bond, facilitate the further reduction of the LTV to 40.6%, and will provide for accretive capital expenditure on assets for the long term.”
Rental Updates
· Ashby Park, Ashby De La Zouch – Ashfield Healthcare Ltd. has let 18,942 sq. ft. of office space to July 2034, with an option to break in 2029, at a rental income of £350,427 pa (£18.50/ sq. ft.).
· Central Park, New Lane, Leeds – QBE Management Services (UK) Ltd renewed its existing leases to June 2025, at a combined rental income of £297,390 pa (£13.79/ sq. ft.) on 21,570 sq. ft. of space, and also renewed its car parking lease for an additional £10,000 pa.
· 1175 Century Way, Thorpe Park, Leeds – Fonemedia Ltd has let 3,524 sq. ft. of office space to May 2029, with an option to break in 2027, at a rental income of £84,576 pa (£24.00 / sq. ft.).
· 1-6 Silver Court, Welwyn Garden City – Telespazio UK Ltd has let 3,873 sq. ft. of office space to April 2027, with an option to break in 2025, at a rental income of £67,800 pa (£17.51/ sq. ft.).
· 84 Albion Street, Leeds – Jugo Digital Ltd has let 1,304 sq. ft. of office space to April 2027, with an option to break in 2025, at a rental income of £66,000 pa (£50.61/ sq. ft.).
· Cardiff Gate Business Park, Cardiff – SMS Energy Services Ltd. renewed its lease to February 2025, at a rental income of £61,908 pa (£14.00/ sq. ft.) on 4,422 sq. ft. of space.
· York House, Felixstowe – Existing tenant Poundland Ltd has renewed existing lease of 7,593 sq. ft. of space at a rental income of £60,000 (£7.90/ sq. ft.). The lease is to April 2027.
· Templeton On The Green, Glasgow – National Society For The Prevention Of Cruelty To Children. renewed its lease to March 2025, at a rental income of £59,820 pa (£12.00/ sq. ft.) on 4,985 sq. ft. of space.
· Oakland House, Manchester – Secretary of State for Levelling Up, Housing & Communities renewed its lease to June 2029, with the option to break in 2027, at a rental income of £59,500 pa (£10.92/ sq. ft.) on 5,450 sq. ft. of space.
· Eagle Court, Coventry Road, Birmingham – Goldbeck Construction Ltd has let 2,863 sq. ft. of office space to May 2025, with an option to break in 2024, at a rental income of £51,534 pa (£18.00/ sq. ft.).
· Murdostoun House, Strathclyde Business Park, Bellshill – ATPAC Ltd has let 3,229 sq. ft. of office space to June 2029, with an option to break in 2027, at a rental income of £41,982 pa (£13.00/ sq. ft.).
· Beaufort Office Park, Bristol – St John Ambulance renewed its lease to May 2028, with the option to break in 2026, at a rental income of £49,170 pa (£16.50/ sq. ft.) on 2,980 sq. ft. of space.
Subsequent Events summary post 30 June 2024
Since the quarter end, the Group has successfully completed a £110.5m capital raise ensuring the repayment of the £50m retail bond, enabling the reduction of bank facilities by £26.3m, and providing £28.4m for identified accretive capital expenditure projects.
Lettings
· 1175 Century Way, Thorpe Park, Leeds – Greenbelt Group Ltd has let 2,670sq. ft. of office space to July 2029, at a rental income of £64,080 pa (£24.00 / sq. ft.).
Forthcoming Events
5 Aug 202410 Sep 202413 Nov 2024
Annual General MeetingInterim Results AnnouncementQ3 2024 Trading Update
The Results Round-Up – The Week’s Investment Trust Results
Among this week’s results, CT Global Managed Portfolio’s Chairman gets his wish; Scottish American tells a fable; while Pantheon International looks to bust a myth or two.
ByFrank Buhagiar•02 Aug, 2024•
CT Global Managed Portfolio (CMPI/CMPG) waiting for sentiment to improve
CMPI/CMPG’s Annual Report presumably includes twice as many numbers as most other funds. That’s because the trust, which invests in other investment companies, is comprised of two share categories: Income (CMPI) and Growth (CMPG). NAV total return for CMPI came in at +7.0%; CMPG +12.7%. Neither could match the FTSE All-Share’s +15.4%. But over the longer term, CMPG has returned +271.5% over the 15 years to 31 May 2024 (+9.1% compound per year). That beats the FTSE All-Share’s +242.5% (+8.6% compound per year).
Alternative investment companies partly to blame for the underperformance over the latest full year. As Chairman, David Warnock, writes “Discounts remained wide and interest rates which stayed ‘higher for longer’ led to reduced NAVs and share prices.” Good job then, interest rates have peaked, although Warnock believes “It may require actual cuts to be delivered for sentiment to improve; however, it does appear a more favourable environment for equity markets is a distinct possibility.” Right on cue, CMPG’s share price rose on 01 August 2024, the day of the BoE’s first UK rate cut.
Winterflood: “Negative performance in both portfolios largely attributed to widened discounts over FY and the valuation impact from higher discount rates. Annual dividend +2.9% to 7.40p per share, representing 13th consecutive year of dividend growth.”
Smithson (SSON) painting a positive picture
SSON’s -1.8% NAV per share total return for the latest half year couldn’t match the MSCI World SMID Index’s +3.4%. Chair, Diana Dyer Bartlett, describes the performance as “frustrating”. The investment managers describe it as “like watching paint dry”. As the Chair explains “The performance of the MSCI World Index, which is driven by the performance of a small number of very large technology stocks, has been very strong. The MSCI SMID Index has returned 12.8% over that period, whilst the MSCI World Index has returned 31.6%.”
Bartlett still believes good returns can be delivered by investing in small and mid-cap stocks. And the numbers back this up: SSON’s +8.2% annualised NAV per share performance since inception nearly six years ago is 0.5 percentage points higher than the MSCI World SMID Index. As for the paint-watching, the investment managers add “While we may have to remain patient a little longer while the paint dries, we remain very optimistic that the picture will be worth it.” Seems the market agreed. Shares were in demand on the day of the results.
Numis: “We believe that the portfolio has sound fundamentals that place it in a strong position to outperform over the long run and that the shares offer value on a c.11% discount to NAV.”
Scottish American (SAIN), steady as she goes
SAIN posted a +5.5% NAV total return for the latest half year, a little off the benchmark’s +12.2%. Three reasons cited for the underperformance: “market sentiment”; “not owning certain non-yielding or deeply cyclical companies which have benefitted from the current environment”; and “SAINTS’ diversifying investments in property and other areas have underperformed equities”
The Interim Management Report puts the performance into context by drawing on the fable of the race between the hare and the tortoise – hare bounds ahead at the start but becomes so over-confident stops to take a nap. This allows the tortoise, who has maintained a steady pace, to overtake the hare and finish first. “We firmly believe that all is well: perseverance remains the name of the game. The underlying growth of the portfolio remains strong, if a little more ‘tortoise’ than the market’s ‘hare’. We remain staunch believers that focusing on companies which steadily compound their earnings and dividends ever-higher will stand SAINTS’ shareholders in good stead in the long-term.” Shares definitely a tortoise on results day, barely moved.
Winterflood: “A third of underperformance comes from cyclicals, and another third from not owning Nvidia. Infrastructure (-4.4%) and fixed income (-4.4%) portfolios showed negative returns while property (+3.1%) portfolio made a positive yet modest contribution through income generation.”
Pantheon International (PIN), busting myths
PIN reported a +6.1% increase in NAV per share for the full year. Growth was down to valuation gains but also from the private equity group’s £200 million buyback programme which added +4.7% to NAV. Over ten years, annualised NAV per share growth stands at +13.5%. The portfolio continues to perform well with underlying investments clocking up +17% EBITDA growth and +14% revenue growth. Growth just half the story. Avoiding losses the other and, here too, PIN has a strong track record. The fund’s realised and unrealised loss ratio for all its investments over the last 10 years is just 2.3%.
Chair, John Singer CBE, explains that, as well as the corporate objective to deliver an attractive risk-return over the long term, the fund is on a mission “to dispel the myths that have surrounded the private equity sector for so long”. So, PIN is increasing its marketing efforts to widen its appeal “And we will continue to do this in the spirit of transparency and communication”. That’s the spirit. Market liked what it heard too, share price ticked higher.
Numis: “PIN’s shares currently trade on a c.33% discount, which we believe offers significant value”.
JPMorgan: “Overall we like PIN’s approach to capital allocation and it remains one of our top picks among the diversified listed private equity companies. We remain Overweight.”
RIT Capital Partners (RCP), a fund built for the times
RCP Chairman, Sir James Leigh-Pemberton, described the flexible investor’s half-year investment performance as solid with the NAV per share increasing by 4.2% (including dividends). All three strategic investment pillars – Quoted Equities, Private Investments and Uncorrelated Strategies – performed positively. RCP’s objective is to grow shareholder wealth meaningfully over time, through a diversified and resilient global portfolio. And the numbers show the fund has delivered. “Since inception in 1988, our NAV has averaged an increase of 10.5% per annum (including dividends), with lower volatility than stock markets.”
Looking ahead, the investment managers are not worried about current geopolitical and economic uncertainty, as “Our portfolio is built for times like this – focused on capturing long-term growth opportunities while being resilient through diversification.” Shares showed resilience on results day, closing marginally higher.
Numis: “The discount remains wide at 26% and we believe this offers significant value given improved disclosure and communication, and evidence for progress with realisations in the private portfolio.”
JPMorgan: “We are Overweight RCP which is a constituent of our investment companies model portfolio.”
Henderson Smaller Companies’ (HSL) year of two halves
HSL reported above average NAV growth for the full year: +14.5% NAV total return compares favourably to the AIC UK Smaller Companies sector’s average of +14.1%. The full-year number does not tell the whole story, however. At the half-way stage, NAV total return was a negative 7.7%, meaning NAV put on +24.0% in the second half. Not enough to keep pace with the Deutsche Numis Smaller Companies Index (ex-investment companies). The 3.7% shortfall was put down to stock-specific issues, but fund manager Neil Hermon is not losing much sleep over it thanks to the robust operating performance of the portfolio companies, their sound finances and attractive valuations. Nor is the market it seems, shares only fractionally lower following the results.
Numis: “Henderson Smaller Companies remains one of our top picks within the UK smaller companies sector. We continue to rate the management team highly and believe that following a period of poor performance over the last 2-3 years, the manager is starting to reap the rewards of sticking to the Growth at a Reasonable Price investment approach.”
F&C Investment Trust (FCIT) maintaining balance
FCIT’s +13.2% NAV total return for the half year beat the FTSE All-World Index’s +12.0%. The Fund Manager’s Report highlights the performance of the Magnificent Seven tech giants – Alphabet +31.8%, Microsoft +20.4%, Amazon +28.4%, Apple +10.7%, Nvidia +151.9%, Meta +44.1% and Tesla -20.4% – not just because they have been driving markets, but because FCIT holds every single one of them with all but Tesla featuring in the global fund’s top-ten holdings.
Not that FCIT is putting all its eggs in the technology basket. For “the Company is well positioned to benefit from a broadening of the rally driven by improving economic momentum outside of the US. Our balanced approach within our portfolio across recognised styles, including value, growth/quality and momentum, provides our shareholders with a well-diversified, global equity investment portfolio”. Shares finished the day marginally lower.
Numis: “The fund has a reasonable track record, with NAV total returns broadly in line with the index over one, three and five years.”
JPMorgan: “FCIT also benefits from low fees and is one of the highest quality large cap global investment trusts. We are Overweight FCIT.”
The Telegraph thinks there’s more to come from JPMorgan UK Small Cap Growth & Income, while The Mail on Sunday believes shares in Cordiant Digital Infrastructure deserve to rebound.
By Frank Buhagiar 30 Jul, 2024
Questor: This fund is riding on smaller companies’ rising tides Whisper it, UK smaller companies are showing signs of life. So much so that The Telegraph’s Questor Column has dusted off a tip it made in summer 2023 – JPMorgan UK Small Cap Growth & Income (JUGI). Actually, two tips. For the £487m trust was only formed in February 2024 following the merger of JPMorgan’s UK Smaller Companies and Mid Cap listed funds. Back then, Questor had been drawn to the fund managers’ strong track record which had seen the small-cap portfolio beat “its stock market benchmark in six of the last seven years. Over a decade it has produced a 206pc total shareholder return – the best in its sector and well ahead of the Deutsche Numis Small Cap index, which has generated just 62pc.”
Over the shorter three-year timeframe, however, the shares have generated a zero total return and that’s including dividends – a symptom of the tough times small caps have had to endure. But what has got Questor excited is the turnaround seen over one year during which JUGI’s shares have risen +39%, “as more investors noticed the incredible bargains that sustained selling by bearish investors had created in smaller UK stocks.” With inflation falling, interest rates expected to be cut and wages rising in real terms, there is “a greater mood of wellbeing.” At least enough of a feel-good factor to show “that the country is not the ‘banana republic’ some overseas investors thought it was”.
So, despite the bounce seen in JUGI’s share price over the past year, Questor believes that “While the early bounce has occurred, we believe there is more to come as UK small companies and the broader stock market comes back into favour. Following the merger, this is a bigger, slightly cheaper growth fund offering an attractive 4pc dividend under a new quarterly payout policy starting next month.” Looks like the fund got the timing of its merger spot on.
Midas: Goals pay dividends for TV tech specialist specialist Cordiant If you are reading this article online in Eastern Europe, Belgium, Ireland or America, it’s quite possible you are doing so with the help of assets owned by Cordiant Digital Infrastructure (CORD). That’s because CORD owns mobile phone towers, cables and data centres in these territories. Assets that, as The Mail on Sunday’s Midas Column writes, “make it possible to buy goods online, stream live TV, make calls, send emails and much else via the internet.” Put simply “Modern life would be almost impossible without these assets.” Not that you would think so, if CORD’s share price was anything to go by. For since joining the London Market in February 2021 at 100p per share, the shares are now at the 76p level.
What’s more the shares trade at a 40% or so discount to the value of CORD’s portfolio – £920million or £1.20 a share at the last count. A number of reasons have been cited including challenging markets and concerns over that £920 million valuation, not helped by peer Digital 9 Infrastructure’s woes. Midas however, thinks “Many of these concerns seem overblown, as Cordiant is well-managed, conservatively financed and has shown it can buy assets well and generate decent income.” Midas takes comfort from the steady rise in dividends from 3p to 4.2p; CORD’s customer base; use of a third-party valuer (accountants BDO); and boss Steven Marshall “energetically buying stock” – he acquired 800,000 more shares last month to bring his holding to over nine million shares.
All of which leads Midas to conclude “Growth is expected to continue at pace and Cordiant should benefit. Shareholders who bought on flotation have been poorly served but, at 76p, the shares deserve to rebound and investors can take heart from the 5 per cent dividend yield along the way.” In short, shareholders are being paid to wait.
