This trust’s dividend has beaten inflation for a decade – but its share price needs a boost

Schroder has been in our portfolio since 2016, and we’d buy it all over again

Robert Stephens 18 July 2025

Questor is The Telegraph’s stock-picking column, helping you decode the markets and offering insights on where to invest.

The FTSE 100 is in the midst of a record-breaking year. After posting desperately poor returns for what felt like an eternity, it has made several new all-time highs during 2025.

Indeed, it appears as though investors are finally beginning to realise that a globally-focused index that trades at a discount to its peers is likely to be a worthwhile prospect.

Of course, the chances of the FTSE 100 posting further record highs may seem somewhat distant amid an ongoing global trade war that could yet heat up after an extended pause.

This may prompt many investors, particularly those seeking a reliable income, to determine that now is an opportune moment to exit UK large-cap shares while they trade at more generous price levels vis-à-vis their recent past.

In Questor’s view, though, long-term income investors are being more than fully compensated for the heightened risk of elevated volatility over the coming months. The index, for example, offers a dividend yield of 3.4pc – this is 2.8 times that of the S&P 500.

The FTSE 100 also remains cheap relative to other major large-cap indices, with many of its members offering significant long-term capital growth potential, as well as dividend growth, amid the current era of monetary policy easing that is taking place across several developed economies.

Therefore, sticking with UK-focused investment trusts such as Schroder Income Growth could prove to be a sound long-term move. It has an excellent track record of dividend growth, with shareholder payouts having risen in each of the past 29 years.

Given the scale and variety of geopolitical challenges experienced in that time, it seems to be well versed in overcoming periods of heightened uncertainty.

The company’s dividends, furthermore, have increased at an annualised rate of 11.3pc over the past decade. This is 50 basis points ahead of annual inflation over the same period, thereby meaning the trust has met its aim to provide positive real-terms dividend growth. And with a dividend yield of 8pc, it offers a substantially higher income return than the FTSE 100 at present.

The company also has a solid long-term track record of capital growth, thereby meeting the other part of its aim. Its net asset value (Nav) per share has risen at an annualised rate of 11.3pc over the past five years. 

This is 50 basis points ahead of the FTSE All-Share index, which is the company’s benchmark. Given that its shares currently trade at an 8pc discount to Nav, they appear to offer good value for money and scope for further capital gains over the long run.

Of course, a gearing ratio of around 11pc means the trust’s share price is likely to be relatively volatile, especially given the aforementioned elevated geopolitical risks.

However, given Questor is highly optimistic about the stock market’s long-term growth potential, leverage is likely to prove beneficial to overall returns in the coming years.

A glance at the weightings of the trust’s major holdings may also suggest relatively high share price volatility lies ahead. After all, its five largest positions account for 28pc of total assets, with its portfolio amounting to a relatively limited 45 holdings.

However, given the FTSE 100’s five largest members account for 31pc of its market capitalisation, this column is not overly concerned about the trust’s concentration risk.

Moreover, well-known FTSE 100 stocks that are fundamentally sound dominate its major holdings. They include AstraZeneca, Shell and National Grid, with the trust adopting a bottom-up approach that seeks to identify market mispricings when selecting stocks.

Since being added to our income portfolio all the way back in December 2016, Schroder Income Growth has produced a capital gain of 18pc. 

Although this is four percentage points behind the FTSE 100’s rise over the same period, which is undoubtedly disappointing, there is scope for index-beating performance as its current discount to Nav likely narrows, the benefits from sizeable gearing in a rising market become more apparent and its focus on fundamentally sound firms catalyses its performance.

As well as offering capital return potential, the trust remains a worthwhile income purchase. Its relatively high yield, potential to deliver inflation-beating dividend growth and excellent track record of consistently rising shareholder payouts more than compensate investors for what could yet prove to be a highly volatile and uncertain second half of 2025.

Questor says: buy
Ticker: SCF
Share price at close: £3.12

Malcolm Wheatley

 
Broke Britain: what it means for investors
The Office for Budget Responsibility’s latest fiscal risks report makes for bleak reading – and investors shouldn’t ignore it.

Higher gilt yields beckon, along with higher taxes.

The argument for overseas investing has grown stronger – despite the government’s protestations that it wants to see more people invest in UK shares.
Wednesday, 16th July 2025

Dear Fellow Fools,

Macroeconomics is a dry subject. With two degrees in economics – or three, depending on how you’re counting – I can truthfully say that macroeconomics is the branch of economics that I liked least.

But sometimes, even the driest subject comes alive. And right now, we’re unfortunate enough to be living in a macroeconomic experiment which is making for very interesting times indeed.

All of which I mention because what’s going on has a direct impact on all of us as investors.

Bleak assessment
July 8 saw the publication of the Office for Budget Responsibility’s latest fiscal risks report. It didn’t pull any punches

The general thrust (and here I’m quoting pretty much verbatim from the report):

• The UK’s public finances have emerged from a series of major global economic shocks in a relatively vulnerable position.
• The UK now has the sixth highest debt, fifth highest budget deficit, and the third highest borrowing costs among 36 advanced economies.
• Efforts to put the UK’s public finances on a more sustainable footing have met with only limited and temporary success in recent years.
• The result has been a substantial erosion of the UK’s capacity to respond to future shocks and growing pressures on the public finances.
• Against this more challenging domestic and global backdrop, the scale and array of risks to the UK fiscal outlook remains daunting.

How we got here
Now, bodies such as the Office for Budget Responsibility don’t use words like ‘daunting’ and ‘vulnerable’ lightly. Nor does it lightly warn of ‘a substantial erosion of the UK’s capacity to respond to future shocks’. This is serious stuff.

George Osborne’s and David Cameron’s era of austerity was unpopular. But it did keep a fairly tight rein on the public finances. And successive governments since have failed to replicate anything like that. Public sector debt has ballooned.

And the present government – which is of a very different political hue, remember – so far appears to be keeping even less of a grip on the public finances. It talks tough, but caves when pressed.

Look at the facts. It has foresworn tax rises. Made massive new spending commitments in areas such as defense and healthcare. Failed to get much-needed spending cuts through parliament, as we saw with the latest welfare climbdown, and the climbdown over the Winter Fuel Allowance. And refused to tackle expensive liabilities such as the so-called ‘triple lock’ on the state pension.

To stress, I’m not making a political point here, but an economic one. Once, the government might have hoped for GDP growth or improvements in productivity to help it out of its hole. But productivity growth is anaemic, and economic growth has been negative for the last two quarters – and this with a government that placed economic growth at the top of its priorities.

Things simply don’t add up.

Threats and opportunities
So where are we heading? And what does it mean for investors? Here’s my take on it.

First, the already-nervous bond market is going to become even more nervous, unless things change – which, as the Office for Budget Responsibility points out, they’ve shown no sign of doing. Worse, the Office for Budget Responsibility is forecasting that pension funds will sharply reduce their gilt holdings in the years ahead, and so gilt yields will have to rise in order to entice foreigners to hold them. UK long-term gilt yields are already higher than they’ve been in the last 25 years, but expect them to climb higher.

That’s good news for income investors, of course, but it also raises the cost of the government’s debt interest. And to the extent that gilt rates drive interest rates in the broader economy, things don’t auger well for business sectors that do best in low interest rate environments. Which is quite a chunk of the economy, when you think about it.

But other countries – and other economies – may, and probably will, have different interest rate environments, and very different GDP growth and productivity environments. Right now, UK shares are cheap on a price-earnings basis, but overseas shares may offer better growth prospects. Not to mention better relative asset prices, going forward, if sterling depreciates. Should you buy UK – or look elsewhere? It’s a very valid question. The government has a view – but isn’t delivering the economic backdrop to support it.

What about taxes? Well, the Labour party campaigned on a pledge not to raise taxes for working people, and Rachel Reeves stated firmly in the autumn that there would be no more tax rises. But how about imposing a tax that doesn’t already exist? Hence the talk of a wealth tax. It won’t be politically popular – but relatively few voters will be affected, unlike continuing the present freeze on tax thresholds.

Raising Capital Gains Tax rates is a distinct possibility, too. Unpopular again, but only with relatively fewer voters – and critically, arguably not ostensibly raising taxes for ‘working people’.

What to do in such a taxation regime? ISAs and pensions offer some relief, and you could always move abroad – as, apparently, people are. But talk to advisers to the wealthy, and you’ll also hear plenty of talk of trusts, family investment companies, gifting assets early to beat inheritance tax, and tax shelters such as Venture Capital Trusts. Sangria in the sun sounds attractive it, but there are alternatives.

We have been warned
So there we have it. I’m aware that this is a Collective column that is a little out of the ordinary, but so too was the report from the Office for Budget Responsibility. And so too, it must be said, is the state of the nation’s finances.

Again, to stress, I’m not making a political point here, but an economic one – and the assessment isn’t mine, but that of the Office for Budget Responsibility.

But the takeaway is clear: hard times, and tough choices, lie ahead. And building wealth – and, critically, keeping hold of it – has rarely been more important.

Until next time,

Malcolm Wheatley
Investing Columnist,
The Motley Fool UK

Could this trigger a stock market crash?

Dr James Fox takes a closer look at an alarming trend in the Far East that could have consequences for investors around the world.

Posted by Dr. James Fox

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.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services.

Japan’s bond market is making headlines again and it could have major implications for stock market investors worldwide.

Bond yields have surged to multi-year highs as the Bank of Japan (BOJ) winds down years of ultra-loose monetary policy.

Once known for rock-bottom yields, Japanese government bonds (JGBs) suddenly offer competitive returns.

As I write, here are the yields and changes (in basis points) in JGB. Rising yields indicates less demand for government debt and will mean government debt becomes more expensive to service.

Bond maturity	Yield (%)	Change (1 month, bp)	Change (1 year, bp)
2-year	0.79	+3.4	+47.7
5-year	1.09	+7.1	+52.3
10-year	1.59	+13.9	+56.8
20-year	2.63	+24.7	+77.5
30-year	3.17	+26.2	+100.5

Why should investors care?

So, why should investors in the UK care? Because the consequences of a Japanese debt crisis could be global. And that may hit stock markets right where it hurts.

For decades, Japan’s low rates powered the ‘yen carry trade’, fuelling equity rallies abroad — including in US tech stocks — as investors borrowed cheaply in yen and ploughed the proceeds into riskier, higher-yielding assets overseas.

But as Japanese yields spike, those investors may start repatriating huge sums back to Japan as the equation shifts. That could mean dramatic outflows from global stock markets, especially in areas most exposed to foreign capital.

What’s more, Japan’s debt burden is now exceptionally high, with its debt-to-GDP ratio above 260%, the highest in the developed world (although Japanese net debt is lower).

Confidence in the stability of Japanese government bonds is being tested and that could spread to other nations with increasingly unsustainable debt… like the UK.

If a crisis of confidence erupts, that could roil not only Japan’s economy but send shockwaves through equity markets globally.

Should investors panic? No. But it’s certainly a concern. Investors with heavy holdings in markets like the US or global tech should keep a watchful eye on Japanese bond developments.

As previously guided, the Company is transitioning to a dividend aligned with project cash flows and EBITDA.  Based on the latest analysis, which reflects the 6-month delay in several new assets coming online and no increase in base merchant revenues from the last 12 months, the Board’s dividend guidance is:

§ 3p special dividend.

§ 0.75p per share per quarter commencing with the quarter ending 30 September 2025 and continuing through FY26/27, with potential for higher dividends during that period if merchant revenue improves.

The fcast yield falls to around 5%, so GSF leaves the Watch List today. If you hold you may wish to hold until the special dividend of 3p, paid in two tranches this year is paid, or you may not.

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The comparison share for the Snowball is VWRP an accumulation ETF.

VWRL the equivalent ETF pays a dividend.

As of the latest data, the Vanguard FTSE All-World UCITS ETF (VWRL) has a current dividend yield of approximately 1.51%.

📊 Quick Snapshot: Co Pilot

• Ticker: VWRL
• ISIN: IE00B3RBWM25
• Dividend Policy: Distributing (quarterly)
• Yield (as of June 30, 2025): 1.51%
• Fund Size: ~£14.4 billion
• Ongoing Charges: 0.22% p.a.

As you can see from the chart above, there will be periods when you make, zero, zilch, nothing for your retirement plan.

There are more risky ETF’s which you could research, especially if you have longer to your retirement.

The current income fcast for the Snowball is £9,120.00.

Using the 4% rule for VWRP the comparison income would be £5,378.00.

Your Snowball should be different to the blog’s, so you may wish to gamble and include a TR percentage.

The choice my friend is yours.

GL

I’ve booked a £200 ‘profit’ with FSFL.

Cash for re-investment £796.00, plus dividends to be received this month to be re-invested back into the Snowball.

These two FTSE 250 shares yield 8.9% and 9.3%. Can that last?

Our writer weighs some pros and cons of two high-yield FTSE 250 investment funds that are both focused on the renewable energy sector.

Posted by Christopher Ruane

Published 4 July

BSIF FSFL

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.

A couple of FTSE 250 investment funds in a similar business both have juicy yields at the moment. One offers just below 9%, while the other is even higher.

Could those yields last – and ought I to buy the shares in question for my portfolio?

Making money from the sun

The 8.9% yielder is Bluefield Solar Income Fund (LSE: BSIF), while 9.3% is on offer at Foresight Solar Fund (LSE: FSFL).

Over the past five years, however, those two shares’ prices have fallen 25% and 21%, respectively.

That partly explains the high yields. Another part of the explanation has been annual increases in the dividend per share during that timeframe.

Those annual increases have continued at Foresight Solar Fund. This year, however, has seen Bluefield Solar Income Fund hold its dividends per share steady for the payments declared so far.

So, given the high yield and also sizeable discounts to net asset value implied by the current share prices (Foresight’s discount is 22% and Bluefield Solar’s is 20%), what is going on here ? What might it signal about future dividend streams?

Variable financial performance

Bluefield has seen revenues grow steadily over the past five years. But income has moved around significantly. Last year, the fund actually made a loss of £10m.

While the fund has locked in the price of some of its power sales, the majority of its output is not sold at a pre-agreed rate. This means that there is a risk weaker energy prices could hurt earnings.

The flip side of that is also true, though: higher energy selling prices could boost profits.

Meanwhile, Foresight swung back to a profit last year after making a loss the year before. Its revenues have also moved around in recent years.

Challenges face the sector

Something I think these two FTSE 250 funds have in common is that they are in a sector with fairly unpredictable economics.

In March, Foresight pointed to “poor weather and persistent macroeconomic headwinds in the UK” as helping to explain why listed renewables companies may be trading at a discount to net asset value. It continued that “meaningful returns of capital will inevitably lead to a reduction in the listed renewables asset class, and we are likely to see examples of successful consolidation”.

In other words, there may be mergers or takeovers in the sector. Given that some solar companies are trading at a deep discount to net asset value, such consolidation would not necessarily be value-creating for long-term shareholders.

The economics of the sector have proven challenging so far. A shift in policy in recent years means that solar energy may not have as large a role in long-term UK power generation as some operators once hoped. That raises the question of how sustainable the current dividend yields will be in years to come. If energy prices weaken substantially, I see a risk that the dividends will be cut.

So, I see the high yields of both of these shares as a warning sign suggesting that the City is concerned about the risks involved in investing in the sector. Even a high yield can be unattractive if a share price falls enough.

Given that context, I do not plan to add either share to my portfolio.

Foresight Solar Fund Limited

(“Foresight Solar”, “FSFL” or the “Company”)

Share buyback programme extension

Foresight Solar, the fund investing in solar and battery storage assets to build income and growth, announces it has allocated up to a further £10 million to its ongoing share buyback programme, bringing the total to a potential £60 million, extending one of the renewables sector’s largest initiatives relative to net asset value (NAV), and strengthening capital returns to shareholders.

Since repurchases began, FSFL has reacquired more than 50 million shares, delivering a cumulative 2.6 pence per share increase in NAV.

Operating performance

Preliminary information from the global portfolio indicates that strong solar resource contributed to electricity production more than 5% above budget in the second quarter of 2025. The Company will publish an overview of its operational performance in August, along with its Net Asset Value update.

Dividend target

The strong global operating performance, in combination with Foresight Solar’s active power price hedging strategy, gives the board confidence in the 1.3x dividend cover target for this year.

During the second quarter, the investment manager continued to secure prices at levels accretive to dividend cover, including forward fixes and financial derivatives. Total contracted global revenues now stand at 88% for 2025, 77% for 2026, and 63% for 2027, with the average hedged power price for the UK portfolio at £85.48/MWh, £74.05/MWh and £74.51/MWh in each corresponding year.

Development pipeline

The latest round of grid capacity awards for battery storage projects in Spain have been announced. The Company has been allocated more than 100MW of capacity across five locations – three in Catalonia and two in the Balearic Islands – a significant step forward in the value creation opportunity from the development pipeline.

Alongside Muel, the 55MW solar project expected to reach ready-to-build status in Spain by the end of this year, the BESS projects demonstrate the proprietary development pipeline is nearing its goal of generating upside for investors as projects are de-risked from development to ready-to-build and to operations.

Divestments

In Australia, technical advisors finalised the necessary forecasting assessments to support bidder due diligence, and the sale process is moving ahead. Whilst this has taken time, the quality of information provided to the market is important to underpin portfolio value.

Good progress has been made in the divestment of the additional 75MW of operational solar projects, with advisors appointed and a live process underway in the market.

Regulatory environment

The government’s update on the Review of Energy Market Arrangements (REMA) was welcome news for the sector. The decisions offer much-needed clarity to investors and consumers, support the renewable energy build-out necessary to meet Net Zero goals, and incentivise the deployment needed to future-proof the country’s electricity network.