The Motley Fool

Very big dividends are expected from these 2 UK shares.
With yields of 9.7% and 5.3%, these UK dividend shares could be a great way for investors to substantially improve their passive income.

Royston Wild

MNG
PRSR

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.

I’m on the lookout for the best dividend shares to buy to turbocharge my investment portfolio. The concept of dividend compounding, where I reinvest any cash rewards I receive, can over time lead to exponential growth in my portfolio’s value

Here are two top passive income shares on my radar today that I feel are worth considering. Both of their dividend yields sail far above the FTSE 100 average of 3.6%.

5.3% dividend yield
The new Labour government plans to build 300,000 new homes each year to solve the housing crisis. But the property shortage will take years to solve, and in the meantime residential landlords like The PRS Group (LSE:PRSR) can expect to enjoy solid profits growth.

City analysts agree, and they expect earnings here to rise 8% and 7% in the financial years to June 2025 and 2026 respectfully.

Latest data from the Office for National Statistics explains why brokers are so bullish. It shows rents in England rise 8.6% during the 12 months to June.

Build-to-rent specialists are picking up the pace of construction to tap this lucrative market, too. PRS — which recorded like-for-like rental growth of 11.1% in 2023 — grew its portfolio by 4% in the final six months of the year to take the total to 5,264.

Investing in PRS may be especially attractive for those seeking large dividends. This is thanks to its classification as a real estate investment trust (REIT). As such, it must distribute at least 90% of profits from its rental businesses to investors.

On the downside, the PRS share price may stay under pressure if interest rates fail to come down. But all things considered I think it’s a great way to target a large passive income. For 2024, its dividend yield currently sits at a juicy 5.3%.

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.

9.7% dividend yield
FTSE 100 business M&G (LSE:MNG) faces a greater level of uncertainty in the near term. Unlike residential property, society’s need for discretionary financial services becomes strained when economic conditions are tough.

Could this threat be baked into the company’s undemanding valuation, however? I believe it is.

Today M&G trades on a forward price-to-earnings (P/E) ratio of 9.9 times. Furthermore, the company’s price-to-earnings growth (PEG) ratio of 0.1 sits well below the widely regarded value watermark of 1.

Like PRS REIT, it has significant demographic trends it can harness to sustainably and strongly grow earnings.

A rising population will drive demand for PRS’s rental homes in the coming years. For M&G, it stands to benefit from the growing number of elderly people, a segment that’s expanding faster than the broader population.

The company is undergoing a transformation programme to better capture this opportunity too. It also has a strong balance sheet it can use to meet its growth plans while also continuing to pay market-leading dividends.

M&G’s Solvency II capital ratio was 203% as of December, latest financials show. This underpins the company’s gigantic 9.7% dividend yield for 2024.

The Motley Fool

by Zaven Boyrazian, MSc

Building a passive income is a popular financial goal. After all, who doesn’t love the idea of money materialising inside their bank account without having to lift a finger for it. And even a modest sum can positively impact an individual’s lifestyle.

Dividend shares are arguably one of the easiest ways to establish a secondary income stream. And while these come with certain risk factors, the barriers to entry are exceptionally low compared to alternative methods. Today, it’s possible to build an income portfolio with as little as £5 a day, or £35 a week. Here’s how.

Buying and selling shares isn’t free. Most brokerage platforms charge a small transaction fee, and even commission-free services have hidden fees that eat into investor capital. Therefore, it’s wiser to let my money accumulate into a more meaningful lump sum.
Apart from reducing transaction fees, this approach provides a few additional advantages:

Saving inside an interest-bearing savings account that pays out on a monthly basis gives me a slight boost to my capital.
Establishes a new habit of systematically putting money aside each week.
Gives me time to reflect on which income stocks are worthy of investment.
After two months, I’ll have around £280 to work with, which is more than enough to build a starting position within a dividend-paying company.

Invest in high-quality companies
Income investing is one of hundreds of strategies being used in the stock market. And volatility can easily sway investors off their chosen path, leading to painful mistakes. When it comes to building a passive income, the focus should be on the longevity of a company and its earnings.

Don’t forget dividends are funded by excess profits. So if a business can’t maintain its margins and sales, shareholder payouts may be quick to follow. With that in mind, it’s important to analyse prospective investments carefully.

A business with no discernible competitive advantage or unique product/service will likely struggle to protect or steal market share. And in the long run, that eventually translates into shrinking profits, dragging both dividends and share price down.

The balance sheet also requires some attention. A thriving enterprise may struggle to stay afloat if the burden of debt is too high. After nearly a decade of near-free money, even FTSE 100 companies have become overly reliant on cheap debt financing. Now that interest rates have gone through the roof, profitability for many leading firms is coming under pressure.

How much can I make?
Realistically, £35 a week isn’t a large amount of money. But by capitalising on the power of compounding, that can change in the long run. Typically, UK shares generate an average return of around 8% each year when looking at the FTSE 100. And 4% of this stems from dividends.

Consistently investing £5 a day at this rate for 35 years would translate into a portfolio worth roughly £321,144. At a 4% dividend rate, that’s a passive income of £12,850. Of course, these returns aren’t guaranteed. Historical performance may not repeat itself, and gains may be lower or higher.

Nevertheless, earning a extra potential 13 grand a year is nothing to scoff at, and could pave the way to a far more comfortable retirement. That’s why I think the risk is worth taking.

The post How to turn £35 a week into lifetime passive income appeared first on The Motley Fool UK.

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The Snowball only invests in Investment Trusts because if one company cancels their dividends it will un-discernible inside a Trust.

Also, most Trusts have built up reserves to pay dividends in time of market stress.

The emotional benefits of dividend re-investment.
In fact, with this investment strategy you can actually welcome falling share prices.

RT toghrr@ntlworld.com 82.1.178.93

If one of your rules is to buy stock that yields min 7%, what was your rationale for purchasing LABS which yields about 5.7% ? Please explain. Thanks

The recommended yield for the Snowball us 7% compounded as this doubles your income in ten years. Lucky if u have longer as compounding quickens the longer u stay in. The recommended time scale is: forever.

If u want to buy a Trust that yields less then 7% u can pair trade it with another high yielder let’s say NESF yielding ten percent, other Trusts available so it’s not advice.

With refence to Labs u are still mixing oranges and apples but maybe u will work out your conundrum one day. GL

Another new name at the top of Winterflood’s list of monthly movers in London’s investment company space. We reveal which fund is having its moment in the sun as well as the names of the three investment companies that have muscled their way onto the broker’s latest list.

By
Frank Buhagiar

The Top Five
Castelnau Group (CGL) storms to the top of Winterflood’s list of investment company monthly movers. Shares in the flexible investor are up +27.5% on the month, an increase on the previous week’s +17.2% gain. The lion’s share of the increase was made over the last few trading days of the week ended Friday 5 July 2024 after a Net Asset Value update issued on 4 July showed net assets stood at £317.5m as at 28 June 2024. The near one-third increase on the £236m reported as at 31 May 2024 largely down to a +45.7% jump in the value of Dignity – the funeral operator accounts for over 70% of CGL’s total assets.

Downing Strategic Micro-cap (DSM) finds itself back on the list, again. Shares in the micro-cap investor, which are up +20.1% on the month, appear to have reacted positively to the company’s press release of 8 July 2024 CIRCULAR & NOTICE OF REQUISITIONED GENERAL MEETING. Shareholders requisitioning a general meeting doesn’t sound like an obvious cause of a share price spike, especially when the fund in question is in the process of winding up and returning funds to shareholders.

The shareholders who requisitioned the meeting are named as Milkwood Capital whom the Board suspects is looking to gain control of the Board and ‘acquire the Company’s assets on the cheap by avoiding making an offer for the entire Company’. Among the resolutions put forward by Milkwood is one that aims to prevent the Board from declaring any dividend, return of capital or other distribution on or prior to the Requisitioned General Meeting. The Board goes on to point out, however, that the Special Dividends already declared on 3 April 2024, 28 May 2024 and 17 June 2024 will not be affected by the outcome of the general meeting. The general meeting is due to be held on 5 August, so won’t have to wait too long for the next instalment of this long-running saga.

Tritax EuroBox (BOXE), another new name to make it onto the list courtesy of a +15.2% gain on the month. Shares have been in demand ever since news broke out that Brookfield Asset Management was thinking of making a cash offer for the logistics real estate investor. Brookfield better get their skates on though for, as per BOXE’s 1 July announcement, the Board revealed that, following the announcement of Brookfield’s possible cash offer on 3 June 2024, it is in discussions with a number of parties from whom it has received and/or solicited expressions of interest regarding a possible offer for the Company.

Augmentum Fintech (AUGM) drops from first to fourth on the list after the fintech investor’s shares saw their gain on the month shrink to +14.1% from +18.8% previously. The shares have benefited from decent news flow in recent weeks including the latest full-year results and news that the South Yorkshire Pensions Authority has acquired a 3.99% stake in the fund. The shares though may need another positive update to make it onto next week’s list.

The Schiehallion Fund (MNTN) completes the top five – shares are up +14%. No material news out from the growth capital investor over the past month but the share price rise can be traced back to 24 June. That’s around the time speculation broke out that SpaceX is planning to sell shares at a valuation of $210bn – as at 30/04/24 SpaceX accounted for 7.3% of MNTN’s NAV. Enough there to give MNTN’s shares lift off it seems.

Scottish Mortgage
Scottish Mortgage’s (SMT) share price finished the week ended Friday 12 July 2024 flat on the month, an improvement on the previous week’s 1% loss. NAV fared worse with a monthly loss of -0.9% compared to a +0.1% gain previously. The wider global investment trust sector finished the week up +3.4% having previously boasted a +2.3% gain on the month. SMT’s ongoing share buyback programme still working its magic it seems.

23.5% yield. 1 of the best REITs to buy in July?
This REIT currently pays one of the highest dividend yields on the entire London Stock Exchange. Is this a warning sign, or a tremendous opportunity?

Zaven Boyrazian, MSc❯

Published 17 July

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.

Real Estate Investment Trusts (REITs) have long been a terrific way to gain exposure to the property market and earn some passive income. With the vast majority of net rental income paid out as dividends, REITs often provide shareholders with impressive yields.

But right now, Regional REIT Ltd (LSE:RGL) is wearing the crown for the largest yield. At 23.5%, shareholders are earning a pretty monumental income stream. What’s driving this enormous payout? And is this a trap or a buying opportunity?

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.

Investigating the yield
The percentage payout shareholders enjoy is driven by two factors. Either the underlying business is hiking dividend payments, or the stock price has collapsed through the floor. In the case of Regional, it’s the latter.

Like most REITs, Regional’s in the business of buying properties and renting them out to generate a reliable and consistent flow of cash. Across the first three months of 2024, the firm generated £65.5m in rent, with 97.2% of tenants paying on time. And with an occupancy just shy of 80%, business appears to be relatively stable from an operational perspective.

Sadly, the firm’s property portfolio has been hit fairly hard in terms of valuation. With interest rates going through the roof, market prices have tumbled, dragging down the share price. And the impact on Regional has been especially diabolical, given that 92.8% of its real estate portfolio is invested in office space – something that’s slowly falling out of fashion on the back of remote working solutions.

Nevertheless, management continues to pay dividends to shareholders, citing that the steady decline in inflation is making way for more favourable market conditions. So is this secretly a screaming buy?

Digging into the financials
Remote working opens the door to cost saving and some efficiency boosts for certain businesses. However, I’m not convinced office working is going to disappear. In fact, we’ve seen a lot of companies starting to encourage or even demand employees return to the office since the pandemic came to an end.

Therefore, the cyclical downturn in the office real estate market is likely to eventually bounce back. At least, that’s what I think. However, it’s difficult to predict when this might happen. And in the meantime, Regional’s in a bit of a pickle regarding debt.

As of March, the group’s net loan-to-value ratio sits around 55.2%. That’s a fairly significant amount of gearing for any business. And it’s significantly higher than management’s desired target of 40%.

The group’s started making progress in reducing its debt burden, which now stands at £413.2m versus £420.8m at the start of the year. And it’s also worth pointing out that all of its loans are now on fixed rates, providing clarity of future interest obligations.

But with an average debt servicing cost of 3.4%, it’s putting a lot of pressure on the bottom line. So much so that the firm’s being forced to sell some of its properties in a pretty terrible market, resulting in the destruction of shareholder value.

With that in mind, it’s no surprise that this REIT’s valuation’s plummeted. And while the firm appears capable of adapting, there are far less risky real estate opportunities elsewhere.

Therefore, personally, even with a 23.5% yield, this isn’t a stock I’m interested in buying right now.

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It’s always better to do some research before posting on the net.

With the cash raise, nearly completed the ratios will all improve.

With the new shares the yield will fall as the dividend is cut.

When the yield falls it will not make the share any less risky if u use that as the reason to buy. The Snowball will looking to sell into any rally and not buy, so I guess other people will be looking to do the same.

Another new name at the top of Winterflood’s list of monthly movers in London’s investment company space. We reveal which fund is having its moment in the sun as well as the names of the three investment companies that have muscled their way onto the broker’s latest list.

ByFrank Buhagiar•15 Jul, 2024•

The Top Five

Castelnau Group (CGL) storms to the top of Winterflood’s list of investment company monthly movers. Shares in the flexible investor are up +27.5% on the month, an increase on the previous week’s +17.2% gain. The lion’s share of the increase was made over the last few trading days of the week ended Friday 5 July 2024 after a Net Asset Value update issued on 4 July showed net assets stood at £317.5m as at 28 June 2024. The near one-third increase on the £236m reported as at 31 May 2024 largely down to a +45.7% jump in the value of Dignity – the funeral operator accounts for over 70% of CGL’s total assets.

Downing Strategic Micro-cap (DSM) finds itself back on the list, again. Shares in the micro-cap investor, which are up +20.1% on the month, appear to have reacted positively to the company’s press release of 8 July 2024 CIRCULAR & NOTICE OF REQUISITIONED GENERAL MEETING. Shareholders requisitioning a general meeting doesn’t sound like an obvious cause of a share price spike, especially when the fund in question is in the process of winding up and returning funds to shareholders.

The shareholders who requisitioned the meeting are named as Milkwood Capital whom the Board suspects is looking to gain control of the Board and ‘acquire the Company’s assets on the cheap by avoiding making an offer for the entire Company’. Among the resolutions put forward by Milkwood is one that aims to prevent the Board from declaring any dividend, return of capital or other distribution on or prior to the Requisitioned General Meeting. The Board goes on to point out, however, that the Special Dividends already declared on 3 April 2024, 28 May 2024 and 17 June 2024 will not be affected by the outcome of the general meeting. The general meeting is due to be held on 5 August, so won’t have to wait too long for the next instalment of this long-running saga.

Tritax EuroBox (BOXE), another new name to make it onto the list courtesy of a +15.2% gain on the month. Shares have been in demand ever since news broke out that Brookfield Asset Management was thinking of making a cash offer for the logistics real estate investor. Brookfield better get their skates on though for, as per BOXE’s 1 July announcement, the Board revealed that, following the announcement of Brookfield’s possible cash offer on 3 June 2024, it is in discussions with a number of parties from whom it has received and/or solicited expressions of interest regarding a possible offer for the Company.

Augmentum Fintech (AUGM) drops from first to fourth on the list after the fintech investor’s shares saw their gain on the month shrink to +14.1% from +18.8% previously. The shares have benefited from decent news flow in recent weeks including the latest full-year results and news that the South Yorkshire Pensions Authority has acquired a 3.99% stake in the fund. The shares though may need another positive update to make it onto next week’s list.

The Schiehallion Fund (MNTN)completes the top five – shares are up +14%. No material news out from the growth capital investor over the past month but the share price rise can be traced back to 24 June. That’s around the time speculation broke out that SpaceX is planning to sell shares at a valuation of $210bn – as at 30/04/24 SpaceX accounted for 7.3% of MNTN’s NAV. Enough there to give MNTN’s shares lift off it seems.

Scottish Mortgage

Scottish Mortgage’s (SMT) share price finished the week ended Friday 12 July 2024 flat on the month, an improvement on the previous week’s 1% loss. NAV fared worse with a monthly loss of -0.9% compared to a +0.1% gain previously. The wider global investment trust sector finished the week up +3.4% having previously boasted a +2.3% gain on the month. SMT’s ongoing share buyback programme still working its magic it seems.

The Tip Sheet

The Telegraph thinks Aurora Investment Trust is a buy, while This is Money offers up a possible solution for those investors wanting to jump on the Nvidia bandwagon but fear they have missed the boat – investment trusts that hold Nvidia but trade at discounts to net assets.

ByFrank Buhagiar

Questor: Believe in this FTSE 100-beating hidden gem as Gary Channon has

The strapline accompanying the above article is ‘Investment trust bargain: this fund has had a phoenix-like recovery’. The phoenix analogy is appropriate for two Firstly, the fund in question is Aurora Investment Trust (ARR) which back in January 2016 was the UK’s worst-performing fund. January 2016 was the month when value investor, Gary Channon, took over the management of the fund and since then ARR has generated a share price tota return of +80.7%. That’s a little off the FTSE All Share’s +86.2% but, as The Telegraph’s tipster explains, this reflects the discount to net assets at which the share price has been trading at on account of UK stocks falling out of favour. Still, enough there to warrant the phoenix-like recovery tag. If that wasn’t enough, the investment management firm run by Channon is called Phoenix Asset Management Partners!

Questor points the finger at Channon’s value approach for the turnaround in fortunes – a focus on investing in a small number of intensively researched stocks he believed to be trading well below their intrinsic value. The fund holds the likes of sports retailer Frasers Group, housebuilder Barratt Developments and investment broker Hargreaves Lansdown which recently found itself the subject of a £5.4bn bid from private equity.  ARR also has a holding in another Channon-run fund, Castelnau (CGL), the shares of which recently jumped +30% on the back of a +46% increase in the value of Dignity – the funeral services group accounts for over 70% of CGL’s assets.

Questor sees Castelnau’s revaluation as ‘an endorsement of Mr Channon’s approach and reiterate our belief in Aurora, which is 13.5pc invested in the sister fund, giving it a decent exposure to Dignity amid a more balanced portfolio that the manager believes could grow a further 130pc before being fairly valued. Questor says: buy.’

This is Money: The investment trusts to back Nvidia and the AI revolution at a discount

Earlier this year, Nvidia became the world’s most valuable company. The shares have since fallen back but as at the date of the above article had still put on +161% since January 2024 and were up a near +3000% over the past five years. All well and good for holders of shares in the US semiconductor giant who are sitting on spectacular gains. But what about those investors who’d like to jump on the AI bandwagon – Nvidia controls 90% of the market for ‘accelerator’ microchips that power generative AI – but fear Nvidia could be a bubble waiting to burst?

This is Money offers up a solution: ‘It is possible to acquire a stake in Nvidia and the other Silicon Valley names through investment trusts whose shares are at a discount to their net asset values (NAVs).’ The article goes on to highlight well-known names such as Baillie Gifford US Growth, F&C IT, JPMorgan Global Growth & Income, Monks and the soon-to-be combined Alliance and Witan. But “some lesser-known names are also backing the Nvidia supernova’ too. These include:

Allianz Technology – Nvidia 9% of assets; shares trading at 6% discount. Fund also holds the likes of Apple, Meta and Microsoft.

Canadian General Investments – Nvidia 8.5% of assets; shares trading at a 41% discount. Fund holds a diverse range of investments including railway companies.

Manchester & London– Nvidia 32% of assets; shares trading at a 15.5% discount to net assets. This is Money notes fund manager Mark Sheppard holds 57% of the shares, offering ‘considerable incentive to shrink the discount.’

Martin Currie Global Portfolio – Nvidia 9% of assets; shares trading at a relatively small 2.85% discount. The fund holds a number of non-tech investments such as L’Oreal. ‘This may be an option if you feel that your portfolio contains too much tech.’

Polar Capital Technology – Nvidia 10% of assets; shares trading at a 6.72% discount.

Scottish Mortgage – Nvidia 9% of ‘this £11.5billion FTSE 100-member trust whose discount has reduced from 20 per cent last summer to 9 per cent.’

I’m taking a step closer to financial freedom with dividend shares

by Charlie Keough

The Motley Fool

I’m buying dividend shares today so that when I retire, I can live off the passive income. The end goal is to be financially free.

Financial freedom will have a different meaning for everyone. For me, I want to be able to enjoy my later life and use the nest egg I’ve built over the years to supplement that.

Around 75% of my portfolio consists of shares that have a dividend yield of 4%, or higher.

The longer u have for accumulation, the more u will have to spend when u are in de-accumulation. It’s all about the yield, the yield and nothing but the yield.

I’ve bought back into JLEN where the current profit for the Snowball is £1,888.21

8800 shares for 8k yielding 8% and trading at a discount to NAV 18.4%