One bright spot might be income – as share prices move up and down violently, the attractions of a regular income via dividends start to become more attractive. According to Octopus Investments’ bi-annual Dividend Barometer private investors should consider UK small and mid-cap companies for income.

Sticking with that dividend income theme, investment trusts that pay a regular dividend might also be looked on more favourably—there’s a long tail of deeply discounted trusts that have a long track record of paying generous dividends, based in part on strong cashflows and built-up shareholder reserves (which allow investors to smooth out the payout).

The Association of Investment Companies (AIC) has just released a useful list of 26 investment trusts that pay a yield of more than 5% and have not cut a dividend in the past ten years. That includes five trusts from the Renewable Energy Infrastructure sector, with yields ranging from 9.2% to 12.5%

Consistent income payers with yields of more than 5%

Low-volatility funds are providing respite

The focus on dividend income reflects an obvious truth – share prices might shoot up and down, but dividend cheques tend to pay out a stable amount. We’ll come back to that income point shortly, but what about the volatile share price bit of the equation? Is it possible to dial down the share price volatility by investing in shares through a fund like an exchange-traded fund (ETF) that only invests in more defensive, less volatile stocks? The answer is yes, and much of the time it’s a very successful wealth preservation strategy.

A good few years back, there was a sudden eruption of interest in what was called smart beta strategies. It sounds complicated, but it isn’t. Essentially, it’s saying you have two ways of passively tracking the (stock) market. The first is to buy into a tracker following a major index like the S&P 500 and be done with it!

The alternative is to say that the crowd, and thus markets, are not always perfectly efficient and that at some points, the market overindulges some trends (positive momentum stocks) and ignores others (value stocks). This gives rise to various market anomalies, as they are called, which range from value stocks through quality stocks to low-volatility strategies. These strategies all involve using technical and fundamental metrics to spot stocks that might be underappreciated and priced inaccurately by the market.

Taken from an article by David Stevenson

Business capitalvue.topx likeslines@gmail.com 168.228.47.148

It’s interesting to see how timing plays a crucial role in maximizing returns. The chart clearly highlights the potential to double your stake with the right strategy. The current yield of 4.77% and the discount to NAV of 4.3% seem promising for investors. How does the timing of entry and exit impact the overall yield in this scenario?

If we refer back to the chart.

Around the covid low the price was 500p and the dividend was 29p a yield of 5.75%. At this time lots of shares reduced their dividends and that is one reason the Snowball invests mainly in Investment Trusts because they have reserves of your cash, if you are a long time holder, to use to top up the dividends in times of market stress.

At the recent low, marked on the chart, the price 660p and the dividend 35.4p a yield of 5.1%.

Its worth noting at the covid low buying price of 500p the current dividend yields 7%.

The Merchants Trust (MRCH) has been highlighted as having increased its dividend year on year for 41 consecutive years by AIC.

You would have been fearful to buy as the price might continue to fall but with a buying yield of 9% at the low, you could have thought it was time buy.

Nearly achieved the Holy Grail of investing, that you could take out your stake, and earn income at a zero, zilch cost.

Plus income from the dividends re-invested into your Snowball

Current yield 5.31% Discount to NAV 2%

09/04/2025

Merchants Trust PLC on Wednesday said its performance fell only slightly short of its benchmark in its recent financial year, saying recent global market volatility shows the advantages of investing in UK listings.

The investment trust, which dates back to 1889, invests in high-yielding UK large-cap companies.

Merchants Trust said net asset value on January 31, the end of its financial year, was 572.6 pence per share, up 7.9% from 530.9p a year before. NAV total return, including dividend payments, was 13.5%, compared to 17.1% for the FTSE all-share index.

The company said the lag was primarily due to its investments in mid- and small-cap stocks, while recently the market has favoured larger companies. It also said its focus on “high and rising income” from its investments takes priority over total return.

Merchants Trust declared a final dividend of 7.3 pence, bringing the total payout for financial 2025 to 29.1p, up 2.5% from 28.4p in financial 2024. It noted that financial 2025 represented its 43rd consecutive year of dividend growth.

Chair Colin Clark noted that the UK companies in which the trust invests have substantial global exposure, with revenue coming from around the world. “It is important to remember that being UK-listed does not mean a company’s fortunes are tied solely to the UK economy,” he said.

“This is particularly relevant at a time, such as now, when international investors, and sometimes even UK investors, are gloomy about the domestic economic outlook.”

Looking ahead, Clark said, “it remains challenging to predict when investor interest will return to the UK stock market, when UK valuations will re-rate to more ‘normal’ levels.”

He added that Merchants Trust will remain a “patient contrarian investor”. “Our manager believes that many opportunities exist to invest in well-managed, financially strong companies on attractive valuations.”

Here are ten closed-end funds (CEFs) with notably high distribution yields as of early 2025. These funds span various sectors, including fixed income, infrastructure, and energy, offering diverse opportunities for income-focused investors:

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🔟 Top High-Yield Closed-End Funds

1. PIMCO Dynamic Income Fund (PDI)
   • Yield: 13.7%
   • Focus: Multi-sector bonds, including high-yield credit and mortgage-backed securities.
   • Note: While offering substantial yields, PDI has faced challenges in covering distributions through net investment income, relying on leverage and derivatives. dividenddetective.com+7Blue Harbinger Investment Research+7Kiplinger+7
2. PIMCO Dynamic Income Opportunities Fund (PDO)
   • Yield: 11.2%
   • Focus: Non-agency mortgages, U.S. government bonds, and high-yield credit assets.
   • Highlight: Managed by PIMCO, known for its expertise in fixed income investments. Mitrade+3Kiplinger+3dividenddetective.com+3The Motley Fool+1Nasdaq+1Blue Harbinger Investment Research
3. BlackRock Debt Strategies Fund (DSU)
   • Yield: 11.04%
   • Focus: Primarily invests in corporate loans, some secured by collateral, offering a balance between yield and risk. Mitrade+2The Motley Fool+2Nasdaq+2Nasdaq+2Mitrade+2The Motley Fool+2
4. DoubleLine Income Solutions Fund (DSL)
   • Yield: 10.48%
   • Focus: Below-investment-grade bonds, asset-backed securities, bank loans, and collateralized loan obligations.
   • Management: Led by Jeffrey Gundlach, often referred to as the “Bond King.” Mitrade+2The Motley Fool+2Nasdaq+2Nasdaq+2Mitrade+2The Motley Fool+2The Motley Fool+2Nasdaq+2Mitrade+2
5. Advent Convertible and Income Fund (AVK)
   • Yield: 12.3%
   • Focus: Convertible bonds and income-generating securities, providing potential for both income and capital appreciation.
   • Advantage: Trades at a discount to NAV, enhancing its appeal. dividenddetective.com+7Forbes+7Kiplinger+7Kiplinger
6. Gabelli Utility Trust (GUT)
   • Yield: 12%
   • Focus: Utility companies, offering stable income streams.
   • Caution: Trades at a significant premium (~53%) to NAV, which may pose risks for new investors. Forbes
7. ClearBridge Energy Midstream Opportunity Fund (EMO)
   • Yield: 8.5%
   • Focus: Midstream energy companies, particularly master limited partnerships (MLPs).
   • Benefit: Provides exposure to energy infrastructure without the tax complexities of direct MLP investments. Kiplinger
8. Cohen & Steers Infrastructure Fund (UTF)
   • Yield: 7.63%
   • Focus: Stocks and debt of infrastructure companies, including utilities and energy firms.
   • Portfolio: Includes holdings like NextEra Energy and Duke Energy. Kiplinger+4Mitrade+4Nasdaq+4Mitrade+2Nasdaq+2The Motley Fool+2
9. Eaton Vance Enhanced Equity Income Fund (EOI)
   • Yield: Approximately 8.5%
   • Strategy: Covered-call writing on a diversified equity portfolio, with significant exposure to the technology sector.
   • Top Holdings: Includes major tech companies, benefiting from sector growth. Seeking Alpha
10. BlackRock Credit Allocation Income Trust (BTZ)
    • Yield: 9.2%
    • Focus: Investment-grade and high-yield corporate bonds.
    • Advantage: Trades at a discount to NAV, offering potential value for investors.

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⚠️ Considerations for Investors

• Premiums and Discounts: Some CEFs trade at significant premiums (e.g., GUT), which can increase risk, while others at discounts (e.g., AVK, BTZ) may offer value opportunities.
• Distribution Sustainability: High yields are attractive, but it’s crucial to assess whether distributions are covered by net investment income or rely on return of capital, which may not be sustainable.
• Leverage Risks: Many CEFs use leverage to enhance yields, which can amplify both gains and losses, especially in volatile markets.
• Tax Implications: Consider the tax treatment of distributions, especially if investing through tax-advantaged accounts.

Given your location in England, it’s important to consider currency exchange risks and potential tax implications when investing in U.S.-based CEFs.

If you need further information on any of these funds or assistance in aligning them with your investment goals, feel free to ask !

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Here are some closed-end funds (CEFs) that offer high monthly yields:

Co Pilot

1. John Hancock Tax-Advantaged Dividend Income Fund (HTD) – Yields around 8.0%.
2. Nuveen Real Estate Income Fund – Known for its strong yield and real estate focus.
3. PIMCO Dynamic Income Fund (PDI) – A popular choice for income investors.
4. Eaton Vance Tax-Advantaged Dividend Income Fund (EVT) – Offers a mix of dividend-paying stocks.
5. BlackRock Enhanced Equity Dividend Trust (BDJ) – Focuses on dividend-paying equities.
6. Cohen & Steers Infrastructure Fund (UTF) – Invests in infrastructure assets.
7. Gabelli Dividend & Income Trust (GDV) – A diversified dividend-focused fund.
8. Western Asset High Income Opportunity Fund (HIO) – Specializes in high-yield bonds.
9. AllianzGI Convertible & Income Fund II (NCZ) – Invests in convertible securities.
10. Nuveen Preferred & Income Securities Fund (JPS) – Focuses on preferred stocks.

10.7% and 12.3% yields ! 2 dividend stocks to consider in May

Looking for ways to make a supercharged passive income over the next year? Here are two top dividend shares to consider.

Posted by

Royston Wild

Published 30 April

FGEN NESF

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

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

2025 is shaping up to be a tough one for global stock markets. With the global economy under growing stress, the opportunity for investors to make healthy capital gains may be limited. In this climate, the best way to target a positive return may be by buying high-yield dividend stocks.

Following recent stock market volatility, investors have an excellent chance to make a market-beating passive income this year. Dividend yields across the London Stock Exchange have shot higher, and many top shares now offer yields miles above the 3.6% average for FTSE 100 shares.

2 top dividend shares

With this in mind, here are two of my favourites to consider in May.

Dividend share	Dividend growth	Dividend yield
Foresight Environmental Infrastructure (LSE:FGEN)	2.6%	10.7%
NextEnergy Solar Fund (LSE:NESF)	1.9%	12.3%

While dividends are never guaranteed, here’s why I think these passive income stocks merit a close look.

Green machine

Despite recent pushbacks against the ‘green agenda,’ companies that produce renewable energy, promote sustainability and champion resource efficiency still have tremendous investment potential, in my book. Foresight Environmental Infrastructure is an investment trust whose broad operations support the long-term fight against climate change.

The company owns more than 40 assets in the UK and Mainland Europe. These range from Scottish wind farms and energy-from-waste plants in Italy, to battery storage projects and wastewater facilities in England.

What’s more, the company’s portfolio is diversified intelligently across these assets types. This provides resilience when, for example, cloudy weather conditions impact power generation from its solar assets. Dividends here have risen each year since 2011, underlining the stability that its operations provide.

For 2025, the predicted dividend is covered 1.2 times by operational cash flow, providing a decent margin of error. I think it’s a top defensive dividend share to consider, even though earnings could be impacted by rising inflation that pushes interest rates higher.

Sun king

NextEnergy Solar Fund is another renewable energy stock I feel is worth close look. With a dividend yield above 12%, it’s one of the highest yielding dividend shares across the whole London stock market.

Unlike Foresight Environmental Infrastructure, its operations aren’t divided across a wide range of technologies. As its name implies, the lion’s share of its portfolio is dedicated to solar farms (it currently has 101 operating projects on its books). Meanwhile, its energy storage asset base comprises of just one operating site.

While this creates greater risk, this isn’t to say that NextEnergy Solar isn’t still well diversified. Its UK farms cover the length and breadth of the country. It also owns solar projects in Italy, Spain and Portugal.

Dividends here have risen each year for around a decade, and it has returned around £346m in cash rewards since its IPO in 2014. With a strong balance sheet — it’s also undertaking share buybacks of up to £20m — I’m expecting the fund to remain a great dividend payer.

The current Snowball. VPC are winding down and should return some more capital this year, then it will most probably be sold.

This £20k ISA delivers £1,961 of cash passive income a year© Provided by The Motley Fool

As a long-term investor, I like buying shares in good businesses at fair prices. Also, my investing style nowadays favours value shares and passive income. Thus, when share prices plunge — as they did during the recent market meltdown — I see these falls as opportunities to buy at a discount.

Hence, I’m often drawn to cheap shares offering market-beating dividend yields to patient shareholders. As my family doesn’t need this income right now, we reinvest our dividends by buying more shares. Over time, this increases our corporate ownership and boosts our total long-term returns.

Passive income from dividends

Though share dividends are my favourite form of passive income, they’re no sure-fire route to riches. Indeed, returns from value/income investing have lagged behind those from growth investing for most of the last 15 years. Also, these three problems can cause problems:

1. Future dividends aren’t guaranteed, so they can be cut or cancelled at short notice. For example, during 2020-21’s Covid-19 crisis, dozens of UK companies slashed their payouts to preserve cash.
2. After paying out dividends, companies have less cash at hand. Therefore, paying out excessive dividends can weaken companies over time.
3. After paying out dividends, companies have less cash at hand. Therefore, paying out excessive dividends can weaken companies over time.
4. Super-high dividend yields, say, 10%+ a year, can warn of future problems. History has taught me that double-digit cash yields rarely last. Either share prices rise, or dividends get cut, dragging down yields.

Three shares would deliver an average dividend yield of 9.8% a year. Therefore, a mini-portfolio of equally weighted holdings in all three stocks would generate passive income of £1,961 annually. Furthermore, this cash stream would be tax-free inside a Stocks and Shares ISA.

In particular, I like the look of M&G as a long-term producer of passive income. M&G was founded in 1931 and launched the UK’s first unit trust that same year. The current share of 186.75p translates into a huge cash yield of 10.8% a year. But this yield has leapt due to recent falls in the M&G share price. This is down 13.4% over one month and 7.2% in a year, but is ahead 43.4% over five years (excluding dividends).

Then again, what if things turn sour again for financial markets, as happened recently? With £312bn of assets under management, M&G’s profits and cash flow could get slammed if stock and bond prices plunge further. Even so, I note that its yearly dividend has risen from 15.77p a share for 2019 to 20.1p for 2024. In short, this passive income looks sound to me!

The post This £20k ISA delivers £1,961 of cash passive income a year appeared first on The Motley Fool UK.

Of course, there are plenty of other passive income opportunities to explore. And these may be even more lucrative:

We think earning passive income has never been easier

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?