This FTSE 250 investment trust’s yielding close to 13% ! But can it last?

Our writer takes a look at a FTSE 250 stock that’s currently yielding nearly 13%. And he considers what this could mean for a long-term investor.

Posted by James Beard

Published 16 June

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.Read More

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SDCL Efficiency Income Trust (LSE:SEIT) is a FTSE 250 member that invests exclusively in the energy efficiency sector. It seeks to deliver cheaper, cleaner and more reliable solutions to commercial, industrial and public sector users. Its portfolio comprises everything from roof-top solar installers to providers of energy-efficient lighting.

For the year ended 31 March (FY25), it declared a dividend of 6.32p a share. This means the stock’s currently (16 June) yielding 12.8%. In cash terms, its FY25 payout is 14.9% higher than in FY21.

But some of its impressive yield has resulted from a significant fall in its share price. At 31 March 2021, the trust’s shares were changing hands for 112p. Today, one can be bought for 49p, that’s 56% lower.

If the share price was the same today as it was at the end of FY21, the stock would be yielding 5.6%. Although not as impressive, it’s still above the FTSE 250 average.

Buyer beware

But a high-yielding share needs to be examined closely. Before parting with my cash, I’d need to be satisfied that the share price decline is a temporary blip rather than an indicator of a more fundamental problem.

At the moment, the trust’s shares are trading at a 46% discount to its net asset value. And the situation appears to be getting worse. The average discount over the past 12 months has been 39%.

A variance is common for investment trusts, especially ones like SDCL that invest primarily in unlisted businesses. It’s difficult to determine accurate valuations when there’s no active market for a company’s shares. However, a 46% discount appears to be wider than most.

But I can’t find any obvious explanation as to why the trust’s shares appear so unloved, other than I think it’s fair to say that the sector as a whole has struggled with rising interest rates – most (including SDCL) have to borrow to fund their expansion.

However, sentiment could be about to turn.

Looking ahead

That’s because investment trusts are a great way of diversifying risk through one shareholding. And diversification’s important during periods of economic uncertainty, like the one we are currently experiencing.

SDCL has over 50 positions (spread across three continents) in companies operating in different sub-sectors of the energy efficiency industry.

And the switch away from fossil fuels and the greater emphasis on cleaner energy’s likely to help its portfolio. However, with relatively low energy prices at the moment, the transition may temporarily slow. But the trust appears to be operating in an industry that’s going to grow over the long term. Net zero’s here to stay.

The trust also has a “progressive” dividend policy which means it seeks to increase its payout every year. Since its IPO in 2018, this target’s been met. Although I see no obvious imminent threat, payouts are never guaranteed and this ambition could come under pressure if the trust’s underlying assets fail to perform as expected.

However, if I’m correct about it being in the right sector at the right time, then its share price could soon start to rise. And this means the stock’s yield is likely to fall. The near-13% return will then be a distant memory. But mindful of this, I think it’s a share that investors could consider adding to their long-term portfolios.

Do you like the idea of dividend income?

The prospect of investing in a company just once, then sitting back and watching as it potentially pays a dividend out over and over?

Should you invest ? The value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

£8,800 in savings? Here’s how investors could turn that into a £20,000 second income… with time

Millions invest for a second income. Here, Dr James Fox explains how an investor can generate a life-changing figure from a modest starting point.

Posted by

Dr. James Fox

Published 19 June

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.

Turning an initial £8,800 in savings into a £20,000 annual second income is an ambitious but achievable goal. Like anything in life, it requires commitment, learning, and a level-headed approach.

So, let’s find out how it can be done.

There’s a formula for success

There are several parts to the formula, and central to it is harnessing the power of compounding effectively over time. Compounding occurs when investment returns generate their own returns, creating a snowball effect that accelerates portfolio growth. This process is fundamental for building wealth, especially when combined with regular contributions and a disciplined investment approach.

Consider an investor who starts with £8,800 and adds £250 monthly into a diversified portfolio targeting an average annual return of 7%. After 31 years, this portfolio would be worth in excess of £400,000.

At that point, withdrawing 5% annually would provide a second income of around £20,000. Increasing monthly contributions or achieving slightly higher returns could significantly impact the size of the portfolio over the long run.

Regular contributions are crucial because they boost the investment base, allowing compounding to work on a larger amount. Even modest monthly additions accumulate significantly over decades.

It’s also worth noting what can be achieved if an investor maxes out their ISA (£20,000 per year of contributions) and achieves a higher but achievable 10% annualised growth rate. Using 31 years as a comparison point, the below chart shows £8,800 transform into £4.6m.

Of course, this is just an example. Many novice investors lose money chasing get-rich-quick dreams. And I appreciate that I could fall short of 10% annualised returns.

I’ve booked a ‘profit’ of £300 with RECI.

Now undecided to add to RECI or not.

Gore Street Energy Storage Fund plc 

(the “Company” or “GSF”) 

  1 pence dividend declared, with an additional special dividend of 3 pence expected when proceeds from the sale of the Big Rock investment tax credits (“ITCs”) are available for distribution.

Residential Secure Income plc

Dividend Declaration

Residential Secure Income plc (“ReSI)”, or the “Company“) (LSE: RESI), which has invested in independent retirement living and shared ownership to deliver secure, inflation-linked returns and is now implementing a managed wind-down strategy, is pleased to declare an interim dividend of 1.03 pence per Ordinary Share to be paid in the financial year to 30 September 2025.

UIL LIMITED

Third quarter dividend declaration

The Board of UIL Limited has declared a third quarterly interim dividend of 2.00p per ordinary share in respect of the year ending 30 June 2025, which will be paid on 29 August 2025 to shareholders on the register on 8 August 2025. The ordinary shares will go ex-dividend on 7 August 2025.

US Solar Fund PLC

(“USF”, or the “Company”)

FIRST QUARTER UPDATE

US Solar Fund plc (LON:USF (USD)/USFP (GBP)), the renewable energy fund investing in utility-scale solar power plants across North America, is pleased to release its first quarter update for the period ended 31 March 2025.

Highlights for the quarter to 31 March 2025:

NAV update:

·    USF’s unaudited NAV as of 31 March 2025 is $196.6 million ($0.64 per share) which represents an increase of approximately 1.3% from the audited NAV as of 31 December 2024

·    The movement in NAV reflects the roll-forward of the valuation models and adjustments to portfolio working capital over the period

Dividend update:

·    Dividend of 0.56 cents per Ordinary Share for Q1 2025 to be paid by 4 July 2025, in line with the Company’s existing annual dividend target of 2.25 cents per share

·    On 17 April 2025, the Board announced an increase in the annual dividend target from 2.25 cents per share to 3.5 cents per share, which will take effect in Q3 2025

Portfolio performance:

·    Generation by the Company’s portfolio in the first quarter was 9.1% below forecast (-11.6% for Q1 2024), with +2.2% attributable to favourable weather and -11.3% attributable to technical (non-weather) factors

·    Performance during the first quarter was impacted by unplanned outages, particularly at the Heelstone and Granite portfolios. This was related to technical issues, as well as planned outages timed to allow maintenance activities to be completed during the lowest production quarter of the year and ensure equipment longevity

·    Ongoing initiatives to manage and remediate technical issues to reduce the occurrence and length of unplanned outages continue to be implemented as part of the remediation plan developed by the Investment Manager’s asset management team

Current yield 5.8%, neither belt or braces so not in the watch list.

Solar stocks plunge: Solar stocks sank premarket due to a proposed phaseout of solar and wind tax incentives by 2028. Sunrun (RUN) dropped 35%, SolarEdge (SEDG) 29%, Enphase (ENPH) 20%, and First Solar (FSLR) 17%. Source: CNBC.

Wall Street Is Cutting Off Uncle Sam (Priming This 9% Payer for Gains)

Brett Owens, Chief Investment Strategist
Updated: June 10, 2025

BlackRock, the world’s largest asset manager, is turning its back on long-term Treasuries—and that’s rattling the bond market.

That, in turn, has the mainstream crowd turning its back on ALL bonds.

Mainstream crowd turning its back? That’s all we need to hear! In a second, I’ll reveal a 9% “contrarians only” dividend that’s tailor-made for this critical time in Bond-land.

First, let’s break down what the global investment titan is telling us here: In its weekly commentary, released June 2, BlackRock laid things out in stark terms (or at least as stark as a stuffy financial institution gets!):

“Our strongest conviction [bolding mine] has been staying underweight long-term US Treasuries.”

Then the real kick in the teeth: “We prefer the euro area to the US.” Ouch.

BlackRock’s not alone in turning up its nose at long-term government bonds. DoubleLine Capital, led by “Bond God” Jeffrey Gundlach, is turning away, too—especially when it comes to the longest of the long bonds:

“Where we can outright short [30-year Treasuries], we are,” one of the firm’s portfolio managers recently said.

We’re talking about 30-year Treasuries here. Invest for three decades and get your cash back at maturity, with a steady payout kicked your way every year.

Till now, these have been seen as among the safest of the safe investments. Yet as I write this, investors are demanding a near-5% yield to take on the “risk” of owning them!

Bond Panic Is Our Opportunity—in These 9%-Paying Funds

All of this—not to mention weak demand at a recent 20-year government bond auction—has investors fretting over bonds, corporate and government alike.

We, meantime, are targeting select corporate bond closed-end funds (CEFs) like the one we’ll name below, quietly kicking out yields of 9%, 10% and more. Let’s get into why, starting with Uncle Sam.

It’s not hard to see why investors aren’t keen to boost his credit line. The Congressional Budget Office (CBO)—famous for its rose-colored glasses—has already projected a $1.9-trillion deficit for 2025.

This leaves the government with a $40-trillion debt hole, deepening by $2 trillion a year. Congress is also working through the One Big Beautiful Bill Act, which the CBO estimates will add $2.4 trillion to deficits over the next decade. And, of course, Moody’s recently lowered America’s credit rating.

With buyers of government debt thin on the ground, long-term government bond yields are rising (and prices are falling, as yields and prices move in opposite directions). That’s a giant red flag for all bonds, right?

Bessent’s Making Quiet Moves to Curb Rates Now …

While this interpretation isn’t exactly wrong, it focuses too much on the numbers and not enough on the human factor, specifically Treasury Secretary Scott Bessent and Fed Chair Jay Powell—or more specifically, Powell’s likely successor.

Let’s start with Bessent, who has straight-out said he wants to lower the 10-year Treasury rate—pacesetter for consumer and business loans. He’s got plenty of tools at his disposal, including leaning more heavily on short-term debt to fund the government.

That limits the supply of “long” bonds, offsetting future lame auction demand and driving up bond prices (while reducing their yields). This is something Bessent criticized former Treasury Secretary Yellen for doing. But he’s been quietly keeping it up.

Finally, we’ve got an administration fixated on tariffs (which slow growth) and lowering energy prices. It won’t take much extra drilling to pull off the latter—WTI crude is already on the mat, at $63 a barrel as of this writing, on rising OPEC production.

Slower growth + lower oil = lower inflation (and lower rates).

… While the Fed Warms Up in the Bullpen

Then there’s Jay Powell, who, yes, has been holding off on rate cuts. (Jay controls the “short” end of the yield curve, the rate banks charge each other for short-term loans.)

But Jay’s term ends in 11 months, and it’s highly likely the administration will appoint a successor who would work with the government to reduce rates. Lower “short” rates would act as a weight on long rates, helping push bond prices higher.

The Bond God’s Favorite 9% Dividend Is Built for Times Like These

All of this is a prime setup for high-yield corporate debt, which is being shunned along with the federal government’s credit. A top play comes from the Bond God himself: the DoubleLine Yield Opportunities Fund (DLY).

As I write this, DLY yields 9%, and its real strength is its wide mandate—Gundlach is free to invest in any form of high-yield credit, anywhere in the world.

That’s what we want: This bond savant unchained and working for us!

He’s taking a smart approach, too, keeping most of DLY’s portfolio (just under 70%) in high-yield corporate bonds, mortgage-backed securities (which despite the fact that they touched off the 2008 financial crisis are highly regulated today), emerging-market debt and a range of other debt instruments with durations of three years or less.

That’s a prudent setup, as shorter-term bonds still kick out strong yields and won’t be hit as hard as longer-term bonds if rates stay stuck at these levels for a while, or even rise. It also frees up Gundlach to reinvest faster as the rate picture shifts.

Beyond that, since Gundlach can invest across the globe, DLY can benefit as more capital, spooked by Uncle Sam’s bloated budget, hunts for yield abroad.

As I write, DLY trades at a 0.6% discount to net asset value (NAV, or the value of its portfolio) down from a roughly 1.5% premium earlier this spring. The fund also pays that 9% annual dividend with monthly distributions. It has paid special dividends in the past, too.

DLY’s Smooth Monthly Payout

Source: Income Calendar

The bottom line? With Bessent working to bring down rates now, and more help likely from the Fed down the road, we’ve got a flexible setup for income and upside, guided by Gundlach himself. Let’s buy before this discount grows into a healthy premium.

A favoured share for the Snowball, although if you wanted to achieve a 7% blended yield, you would have to pair trade it with a higher yielder. Another opportunity that the Snowball failed to buy, although it did make a profit of £732 trading another dividend hero MRCH.

The Snowball is building a rainy day fund, so maybe one day it can buy LWDB but looking at the chart, not for a while, which is a plus as it will allow time for more funds to be added to the rainy day fund. There will be around 2k of income to be re-invested into the Snowball this month, most probably in RECI.

Both shares paying above average market yields.

But using only the information provided by the chart, again with the benefit of good ole hindsight, which share would you had the greatest chance of making a capital gain along with your dividend income if you research was wrong ?