Investment Trust Dividends
Value on the 2nd Jan 2025 £134,467. Using the 4% rule that would provide a ‘pension’ of £5,378.00
Value on the 1st Aug 2025 £137,980. Using the 4% rule that would provide a ‘pension’ of £5,519.00
You have added £141.00 to your retirement fund, which with the current markets may move into a negative figure next week.
The Snowball has provided income of £7,393.00 for re-investment.
2025 income fcast for the Snowball £9,120.00
The control share VWRP.
I’ve included dividends re-invested, as dividends are automatically included in the quoted price.
Looks look forward, in twenty years time you are 2 years from you planned retirement date and if you have been paying attention you know with compound interest that you earn more income in the last few years than in most of the early years, here you have earned, zero, zilch, nothing.
If we compare to the Snowball in twenty years time:
In year one you could earn £25,738
In year two £27,539
Of course, you could be lucky and VWRP goes up by more but do you really want to rely on luck to fund your retirement ?
Our columnist explains why these investment trusts are in his forever fund and how they could be a good match for investors who want to diminish risk by diversification.
31st July 2025
by Ian Cowie from interactive investor
Tilting at windmills was an early sign that Don Quixote was going mad in the famous 1605 novel of that name. Now that Donald Trump, the American president, has taken a tilt at Britain’s wind turbines this week, is it time to reconsider investment trusts exposed to renewable energy?
Trump told reporters at Prestwick Airport in Scotland: “You see these windmills all over the place, ruining your beautiful fields and valleys and killing your birds, and if they’re stuck in the ocean, ruining your oceans.”
He claimed the turbines drive whales “loco” and added: “The whole thing is a con job. Germany tried it, and wind doesn’t work.”
Never mind all that hot air, the £2.6 billion investment trust Greencoat UK Wind UKW
currently blows out 8.3% dividend income, which has risen by an annual average of 7.6% over the past five years, according to independent statisticians LSEG; formerly London Stock Exchange Group.
It is important to beware that dividends are not guaranteed and can be cut or cancelled without notice. However, if that rate of ascent could be sustained, it would double shareholders’ already substantial income in less than a decade.
This exhilarating prospect is enough to earn UKW a place in my ISA, where I hope its handy four-figure annual tax-free income will help to pay for an enjoyable retirement. Better still for buyers today, despite strong long-term returns, recent performance has been disappointing and is reflected in the shares being priced 17% below their net asset value (NAV).
UKW is the top performer over the past decade in the Association of Investment Companies (AIC) “Renewable Energy Infrastructure” sector and ranked second over the past five years, before shrinking over the past year. Its total returns over the three periods were, respectively, 88%; 12% and minus 9.4%.
Elements of the explanation for recent share price weakness include falling electricity output, doubts about dividend cover and NAV. Iain Scouller at the stockbroker Stifel said on Wednesday: “This morning, UKW announced first-half (H1) electricity generation was 14% below budget due to low wind speeds.
“As a result, dividend cover was 1.4 times earnings for H1 as a whole, including two times in Q1 2025, which implies Q2 was barely covered, if at all.
“The NAV also saw a fall over H1 from 151.2p at the end of December last year to 143.4p at June 30, 2025, a decline of minus 5.2%. This is a disappointing set of results given the size of the NAV fall, decline in dividend cover, and we think the discount is vulnerable to widening.”
Against all that, Ben Newell at the stockbroker Investec, noted that UKW has increased its dividends every year since its launch in 2013 by at least as much as the Retail Prices Index (RPI), and repeated his “buy” recommendation. A long track record of preserving the real purchasing power of our income is a powerful attraction for investors nearing retirement.
What do the board of directors think? Three out of UKW’s six directors have more invested in its shares than their annual fees but two of them hold no stock at all and the chair, who has been in place since 2019, holds little more than a tenth of her annual fee in this stock.
More encouragingly, the fund management team hold UKW shares worth £7.1 million, according to Investec’s “skin in the game” research. So, whatever happens next, at least the fund managers and half the board will experience ordinary shareholders’ pleasure or pain.
To return to where we began, Trump has touched a nerve that divides opinion dramatically but this is not the place to get into the ecology or science, for or against, his allegations. From a purely financial point of view, investors who wish to diminish risk by diversification across a wider range of renewable energies might prefer the £3 billion Renewables Infrastructure Grp TRIG
which yields 8.6% income, rising by 2.5% on the same basis as above.
But TRIG’s total returns have been disappointing recently; over 10 years they were 52%; over five years they were minus 13%; and over one year it lost 11%. No wonder TRIG is trading at a 25% discount to NAV.
Even more diversification across all forms of renewable energy, including controversial nuclear power, is provided by my biggest investment trust holding, Ecofin Global Utilities & Infra Ord EGL
.This £294 million fund yields 3.8% income, rising by 5% per annum, and trades 9.8% below NAV.
Unfortunately for investors who seek a long track record of historical data on which to base decisions, EGL won’t celebrate its 10th anniversary before September next year. But its total returns over the past five years were 59% followed by 26% over the past year.
This earns EGL its place as the fifth-most valuable holding in my 50-stock “forever fund” and shows how it can pay to accept a lower initial income, albeit rising strongly, in the hope of higher total returns. That is likely to remain true whatever Trump says or whichever way the wind blows.
Ian Cowie is a freelance contributor and not a direct employee of interactive investor.
The current plan for the Snowball
Remember most of the compounded gains are made in the final few years rather than in all the early years, so the sooner you start the sooner you will finish.
Current earned dividends for the Snowball £7,393, less £1,933 from VPC which has been re-invested to earn more dividends but is not a repeatable dividend.
£5,460, which would equate to income for £9,360 which would be ahead of the plan of £9,120 and the target for next year would be £9,758, if the Snowball manages to outperform, hopefully we will be able to skip a year.
Remember that the table shows the compounded interest added at the end of the year but you will receive dividends every month to invest, to earn more dividends. There is a cost to re-invest so the minimum amount re-invested is around 1k,. Any rebalancing costs uses the markets money so could be less.
All baby steps.
A Russian proverb states, “Those who take no risks, drinks no Champagne”. So that’s why I use these simple investments to generate powerful passive income!
Posted by Cliff D’Arcy
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.
When I first started investing in the late 1980s, I was studying maths, statistics, and computer science. This gave me a leg-up in understanding financial markets, so I’ve been trying to build wealth ever since. However, I often hear students and young people say they ‘hate maths’ and don’t understand investing. So here’s my quick guide to one of my favourite things: passive income.
Passive income is earnings that come other than from paid work. Nevertheless, some passive income requires hard work, such as managing rented properties — dealing with tenants and their problems. I’m too lazy for this, so I haven’t built a property empire.
Unearned income can come with little effort, such as savings interest from cash deposits. That said, I don’t know many people who got rich from avoiding all risks, so I don’t keep tons of cash in savings accounts.
Owning bonds is riskier than saving in cash, because these fixed-income securities are IOUs (debts) issued by companies and governments. If trouble arrives, their coupons (interest) and capital (the initial investment) could be under threat. Even so, my wife and I own a wide range of bonds through a single money-market fund.
However, my preferred form of passive income by far is share dividends. Some people believe that owning shares is no better than buying lottery tickets. However, my goal is to become part-owner of a wide range of great businesses. And when these companies do well, many of them choose to pay out dividends to shareholders.
Most members of the UK’s FTSE 100 index pay dividends. This makes the Footsie my happy hunting ground for generating passive income. Still, future payouts are not guaranteed, so they can be cut or cancelled at short notice (as happened in Covid-hit 2020/21). But as American tycoon John D Rockefeller once remarked, it gives me great pleasure to see my dividends coming in.
The Motley Fool
Story by Royston Wild 2024
Dividend shares are (in my opinion) one of the best ways to target a long-term passive income. With the use of a Stocks and Shares ISA, investors can build a large and steady income stream with shares, trusts and exchange-traded funds (ETFs).
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. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.
It’s critical to remember that dividends are never guaranteed, as company payouts during the pandemic showed. As the Covid-19 crisis exploded, even the most reliable of passive income stocks cut, postponed or cancelled dividends entirely as earnings faltered and balance sheets deteriorated.
Yet over the long term, we’ve seen that a well-diversified portfolio can deliver a reliable stream of dividends. A portfolio whose holdings are spread across dozens of companies, industries and regions can provide a solid income across all points of the economic cycle.
Here are two top ETFs worth considering that I believe could deliver a large long-term dividend income.
With holdings in scores of companies worldwide, the SPDR S&P Global Dividend Aristocrats UCITS ETF (LSE:GBDV) offers excellent diversification straight off the bat.
In total, this ETF has holdings in just over 100 different shares. Major holdings range from Verizon Communications and CVS Health to Universal Corp.
On the downside, half the fund (49.5%) is tied up in US shares. This means it carries greater geographical risk than more regionally spread vehicles. However, this allocation also taps into the long-term outperformance that Wall Street has enjoyed.
This SPDR ETF’s quest for dividend growth doesn’t mean that yields are sacrificed however. Its 12-month trailing dividend yield’s currently a market-beating 3.9%. During the last five years, the fund’s delivered a total average annual return of 10.5%.
Investing in property stocks is another way to target a dependable passive income. There are many themed ETFs available to play this hand, one of which is the iShares MSCI Target UK Real Estate (LSE:UKRE).
Thanks to their consistent rental incomes, property stocks tend to enjoy consistent cash flows that support regular dividend payments. I like this particular fund because it focuses more specifically on real estate investment trusts (REITs). These investment vehicles are required to pay at least 90% of annual earnings from their rental operations out in dividends.
What’s more, the REITs it holds span multiple sectors including healthcare, retail and residential, providing an attractive balance of reward and safety. A large portion of the fund’s also dedicated to UK government bonds as well, which provides added security.
Since 2020, this iShares fund has delivered an average annual return of just 0.6%. It could continue disappointing if interest rates remain higher than normal. But with inflation dropping, I expect returns to improve strongly from this point.
The 12-month trailing dividend yield here’s a huge 6.6%.
It’s critical to remember that dividends are never guaranteed, as company payouts during the pandemic showed.
The Snowball invests mainly in Investment Trusts as most have reserves to pay their dividends in time of market stress.
Why the Snowball doesn’t own any shares.
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.
Three. Remember the rules
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.
GL
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