Time for me to increase my holding in this 11.1%-yielding FTSE 250 gem to target £45,811 in annual passive income?

This FTSE 250 firm offers one of the highest yields in any major FTSE index, which could one day generate enormous passive income if I invest wisely.

Posted by

By Simon Watkins

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 first bought shares in FTSE 250 investment manager abrdn (LSE: ABDN) after it was demoted from the FTSE 100 in 2023.

This may appear an odd choice to many, but I did it for three reasons that I still think hold good.

The price drop didn’t reflect fundamentals

The first was that the resultant price drop had nothing to do with the firm’s fundamental quality. This meant to me that a potentially huge value gap immediately opened in the stock.

Specifically, FTSE 100-tracker funds had no choice but to sell the shares when they fell out of the leading index. The same applied to funds only allowed to invest in FTSE 100 shares.

Company reorganisation in progress

Despite the company already being fundamentally very solid in my view, it embarked on a reorganisation. The aim of this was to cut costs, improve its offering to clients, and boost profitability.

A risk for my investment is if this reorganisation fails for some reason. However, it appears to be going well so far, with H1 results showing an IFRS post-tax profit of £171m. In the same period in 2023, it recorded a £145m loss.

Also positive was a 13% year-on-year reduction in operating costs over the same period – to £372m.

Its 24 October Q3 trading update showed assets under management increase 2% year on year – to £507bn.

Huge passive income potential

I am considering buying another £5,000 block of abrdn shares, bringing the total up to £15,000. The previous two blocks were bought around the same share price as now, when the dividend paid was also 14.6p. This currently yields a stunning 11.1% based on its present £1.32 share price.

In fact, abrdn’s dividend has been the same since 2020. And analysts forecast it will stay the same this year and next.

So, £15,000 invested in abrdn would make me £1,665 in annual ‘passive income’ (this is income made with minimal effort) from now. If the yield averages the current 11.1% over 10 years (which is not guaranteed) this would rise to £16,650 and over 30 years to £49,950.

How do I supercharge those returns?

These returns are a lot more than I could make in my standard UK savings accounts.

However, if I used the dividends paid to buy more abrdn shares (‘dividend compounding’) then they could be much greater.

In abrdn’s case, doing this would make me £30,284 over 10 years, not £16,650, if the yield averaged the same. On the same basis, this would increase to £397,709, rather than£49,950!

By that point – and adding in the initial £15,000 investment – my abrdn holding would be worth £412,709.

If the 11.1% yield was still in play, this would generate me £45,811 a year in passive income.

Assuming inflation over the period, the buying power of that money would have been diminished somewhat by then. However, I should have a much more comfortable retirement than I would if I relied on the State Pension.

Consequently, I will be buying the additional abrdn shares very soon

Here’s what to look for when aiming to earn a second income from dividend shares.

Story by Mark Hartley

Stack of British pound coins falling on list of share prices© Provided by The Motley Fool

Building a portfolio of dividend shares as a means to earn a second income is a popular method used by British investors. Considering the unusually high yields found on the FTSE 100 and FTSE 250, it’s no surprise many see the benefit in the UK stock market.

Why dividend shares?

Dividend investing can be a reliable source of passive income due to the regular payments. For those wanting to build up an investment, the dividends can also be reinvested to compound the growth. This makes them attractive to both early investors and retirees.

Maximise returns 

The key is to get started as soon as possible, even with just £5 a day. To ensure maximum returns, there’s a few important tips to remember to avoid making common investment mistakes. 

Most investors already know the importance of diversification but it’s worth noting. Spreading an investment across different sectors and stocks reduces exposure to a single point of failure.

With dividends, aiming for a high The post Here’s what to look for when aiming to earn a second income from dividend shares appeared first on The Motley Fool UK. . But it’s not the only thing to consider. A history of consistent payments is also important — as is the payout ratio. This indicates the company’s ability to cover payments.

Dividends can be cut at any time so it’s important to assess the reliability of payments. A very high yield (10%+) can be a sign of a struggling stock with a plummeting share price.

Two examples

In late 2021, investors may have jumped at the chance to buy Rio Tinto (LSE: RIO) shares after the yield soared past 11%. A growth in profits that year prompted the mining giant to pay a special dividend. 

Even though the shares recovered the following year, the company slashed dividends by 38% on weaker revenue and earnings. Further reductions were made the following year, bringing the yield back down to 7.3%.

Lower dividends mean the company can invest more in growth, so things may improve from here. But such a cut still leaves a dent in a high-yield dividend portfolio.

A better option may be Imperial Brands (LSE: IMB). The tobacco giant is a reliable payer with a year-on-year dividend growth rate of 4.5%. Dividends have grown from 43p to 153p per share in the past two decades, with only one reduction during the pandemic.

Since 2020, NGP revenue is up 64%. Last year alone it grew 26.4%, helped by the launch of Zone oral pouches in the US. If that continues, it could remain a strong dividend stock. For investors focused on reliable dividend returns, I think it’s a stock worth considering.

The post Here’s what to look for when aiming to earn a second income from dividend shares appeared first on The Motley Fool UK.

Assura plc

Trading update for the third quarter ended 31 December 2024

Assura plc (“Assura”), the UK’s leading diversified healthcare REIT, today announces its Trading Update for the third quarter to 31 December 2024.  

Jonathan Murphy, CEO, said:

“We have maintained momentum in the third quarter continuing to deliver against our strategic objectives. The recently acquired 14 private hospitals are now fully embedded into our portfolio and are performing as we anticipated. Our asset disposal programme, announced at the time of our private hospital acquisition, raised £48 million during the period and active discussions are underway on a further £110 million. We are on track to hit our target net debt to EBITDA below 9 times and LTV below 45% over the next 12 to 18 months.

“There is ongoing national recognition that improved health outcomes can be delivered by investment in community healthcare and through utilising capacity within the private sector. We have seen this recognition backed up by policy actions: £900 million of funding for GPs announced in December; an additional £100 million of committed investment to upgrade the GP estate; and this month a new partnership agreement between NHS England and the independent sector to work together for the benefit of patients. Assura is uniquely positioned to support this shift through the delivery of high-quality, modern and sustainable facilities.

“As the UK’s leading diversified healthcare REIT, our progress in the third quarter, and a dividend yield of over 9%, strengthens our position as an attractive long-term investment that is underpinned by stable trends in the UK healthcare sector.”

Delivery against our strategic objectives

•      Disposal programme progressing strongly with 17 properties sold in the quarter for net proceeds £48.4 million, in line with book value, in addition:

o  £110 million of disposals in active discussions

o  £90 million further pipeline identified for potential disposal

•      Positive progress on rent reviews, 59 settled in the quarter, covering £8.5 million of existing rent and generating an uplift of £0.6 million (7.2% uplift on previous passing rent)

•      Well positioned to take advantage of the strong growth in the UK private hospitals market

o  Early discussions on several asset enhancement opportunities on existing sites

o  Growing pipeline of further development opportunities

•      Completed one asset enhancement capital project (total spend £1.2 million) and 5 lease regears (existing rent £1.2 million); on site with a further two capital projects (total spend £4.0 million)

•      Current quarterly dividend 0.84 pence per share, or 3.36 pence per share on an annualised basis (equivalent to 9.3% dividend yield on last night’s share price)

Pipeline of opportunities for strategic expansion and further growth 

•      £35 million of rent (20% of rent roll) due to be reviewed to RPI or CPI in Q1 2025

•      Currently on site with five developments; total cost of £44 million with £22 million remaining to be spent

o  Two net zero carbon buildings in the UK (one GP medical centre, one NHS children’s therapy centre) both of which are due to be completed and fully rent producing in the next quarter

o  Three on site schemes in Ireland progressing well

•      Pipeline of 12 capital asset enhancement projects (projected spend £8.3 million) over the next two years

•      29 lease re-gears covering £2.8 million of existing rent roll in the current pipeline

Strong and sustainable financial position

•     Portfolio now stands at 608 properties with an annualised rent roll of £176.9 million (September 2024: £179.1 million)

•     Net debt reduced by £46 million with disposal proceeds used to reduce the drawn revolving credit facility

•     Weighted average interest rate 2.93% (September 2024: 3.0%); all drawn debt on fixed rate basis

•     Weighted average debt maturity of 4.9 years, limited refinancing on drawn debt over the next 3 years. Over 40% of drawn debt matures beyond 2030, with our longest maturity debt at our lowest rates

•     A- rating reaffirmed by Fitch in August following private hospital portfolio acquisition

•     Net debt of £1,529 million (September 2024: £1,575 million) on a fully unsecured basis with cash and undrawn facilities of £190 million

SUPERMARKET INCOME REIT PLC  

(the “Company”)  

  

DIVIDEND DECLARATION

   

Supermarket Income REIT plc (LSE: SUPR), the real estate investment trust with secure, inflation-linked, long-dated income from grocery property, has today declared an interim dividend in respect of the period from 1 October 2024 to 31 December 2024 of 1.53 pence per ordinary share (the “Second Quarterly Dividend”).

The Second Quarterly Dividend will be paid on or around 28 February 2025 as a Property Income Distribution (“PID”) in respect of the Company’s tax-exempt property rental business to shareholders on the register as at 31 January 2025. The ex-dividend date will be 30 January 2025.

The funds topping their sectors over three very different years

07 January 2025

Trustnet found 69 funds that achieved top-quartile returns in three back-to-back years.

By Emma Wallis,

News editor, Trustnet

Fund managers have had to contend with vastly different investment environments during the past three years, from high inflation and interest rate hikes in 2022, causing bonds and equities to plummet, to the recovery in 2023 and the bull market of 2024 – punctuated by a bout of volatility last summer.

Amidst mounting geopolitical tension, macroeconomic uncertainty, an artificial intelligence boom and a tumult of elections, 69 funds in the Investment Association (IA) universe managed to consistently beat their peer groups and deliver top-quartile returns in each of the past three calendar years.

This represents 2% of the 3,358 funds in the IA universe with three-year track records, where quartile rankings were available.

These figures exclude the IA Unclassified, Specialist, Volatility Managed, Targeted Absolute Return and Property Other sectors, for which quartile rankings were not attainable.

A larger cohort of 374 funds were top quartile in both 2023 and 2024, when markets were driven by similar factors, such as the AI exuberance and the dominance of the Magnificent Seven.

To some extent, 2023 was a transition period with interest rate hikes throughout the first half before a fourth-quarter relief rally once the market became convinced that rates had peaked.

Nonetheless, the investment environment of 2022 and the factors that drove performance were dramatically different to the following two years, as the chart below shows, which is why so few funds outperformed in all three years.

Performance of global equities and bonds, 2022-24

Source: FE Analytics

Amongst the 69 top-quartile funds in three back-to-back years, Japanese and Indian equity funds achieved some of the best overall performance, as the table below shows.

Japanese equities surged on the back of corporate governance reforms, economic modernisation and the return of inflation, while India’s exponential economic growth delivered compelling returns for investors.

The 25 consistent outperformers making the highest three-year returns

Source: FE Analytics

Nomura Japan Strategic Value, Jupiter India Select and Jupiter India delivered the highest returns over the three-year period.

The iShares S&P 500 Information Technology Sector UCITS ETF pipped them to the post in 2023 and 2024, as AI exuberance propelled chip designer Nvidia and other tech giants to ever greater heights. However, it made a thumping loss of -19.4% during the bear market of 2022, even though it was still within the top quartile of the IA Technology & Technology Innovation sector.

Tech stocks were pulled downwards in 2022 as demand fell off a cliff following the Covid-19 lockdown spending splurge and as interest rate hikes increased the discount rate used to value growth stocks.

The $1.8bn Nomura Japan Strategic Value fund takes the top spot for three-year performance and has beaten its sector and benchmark by a wide margin. Manager Yoshihiro Miyazaki uses quantitative screens combined with bottom-up fundamental research to find stocks priced below their intrinsic value, where corporate restructuring can unlock returns.

Performance of funds vs sector and benchmark, 2022-24

Source: FE Analytics

Eight Japanese equity funds attained top-quartile performance in three back-to-back years – slightly more than in the IA Global and IA Europe Excluding UK sectors (seven funds apiece, making them the next-best sectors for consistency).

Man Japan CoreAlpha and Arcus Japan deserve honourable mentions for being the top and fourth-best performers of all 69 reliable funds in the difficult market of 2022.

Performance of funds vs sector and benchmark, 2022-24

Source: FE Analytics

India was another sweet spot, where the £2bn Jupiter India fund proved popular with investors and was one of the most-bought funds during the first half of 2024. Managed by Avinash Vazirani, it has greater exposure to small- and mid-cap stocks, which are geared into India’s domestic growth story, than many of its peers.

Jason Hollands, managing director of Bestinvest, said: “The fund is managed by a well-regarded and stable team who have delivered very strong returns.”

Performance of funds vs sector and benchmark, 2022-24

Source: FE Analytics

A full list of the 69 top-quartile funds in three back-to-back calendar years is below.

Source: FE Analytics

£££££££££££££££££

The Snowball invests mainly in Investment Trusts and has a position in one ETF, all for the dividend stream to be compounded.

If you have a longer term to your retirement, you could invest 75% for dividends and 25% for TR, or 50/50. The choice my friend is yours.

Urban Logistics REIT

Discount at odds with growth plans

A negative reaction to the UK budget sent gilt rates higher and saw investor caution return to real estate stocks. The recent share price weakness that followed this has seen Urban Logistics REIT’s (SHED’s) discount widen to more than 30%, which is at odds with the sector fundamentals and the work the company’s adviser is putting in. An asset recycling programme is underway. Here the adviser is targeting new assets, where it can work its asset management enhancement magic. This, coupled with the adviser’s expertise in driving up rents and capturing rental reversion from its portfolio, should result in substantial earnings growth and much-coveted dividend cover. Meanwhile, a more normalised occupier market is forming, with supply and demand fundamentals returning to pre-COVID levels, putting greater emphasis on landlords’ ability to achieve returns. This is where SHED has traditionally excelled and, with its active approach to asset management, the foundations are set for a re-rating of its shares.

SHED invests in a diverse portfolio of single-let, urban logistics properties located in the UK, with the aim of providing its shareholders with a 10% to 15% total return per annum.

This marketing communication has been prepared for Urban Logistics REIT Plc by Marten & Co (which is authorised and regulated by the Financial Conduct Authority) and is non-independent research as defined under Article 36 of the Commission Delegated Regulation (EU) 2017/565 of 25 April 2016 supplementing the Markets in Financial Instruments Directive (MIFID). It is intended for use by investment professionals as defined in article 19 (5) of the Financial Services Act 2000 (Financial Promotion) Order 2005. Marten & Co is not authorised to give advice to retail clients and, if you are not a professional investor, or in any other way are prohibited or restricted from receiving this information you should disregard it. Charts and data are sourced from Morningstar unless otherwise stated. Please read the important information at the back of this document.

Thursday 9 January

Baillie Gifford European Growth Trust PLC ex-dividend date
BlackRock Frontiers Investment Trust PLC ex-dividend date
Martin Currie Global Portfolio Trust PLC ex-dividend date
Primary Health Properties PLC ex-dividend date
Scottish Oriental Smaller Co Trust PLC ex-dividend date

You knew that MRCH was a dividend hero and watched as the price fell.

The previous year’s dividend was 27.10p. Price 350p a yield of 7.8%.

You also knew that MRCH had dividend reserves to pay the dividend in times of market stress.

You decide to buy and for this example, you decide just to re-invest the dividends back into MRCH.

You decide to take out your stake and re-invest in another high yielder.

You have achieved the holy grail of investing of having a Trust in your portfolio that pays you an income at zero, zilch, nothing cost.

The current yield with MRCH is 5% and if you re-invested in another Trust yielding 10% your yield on your initial buy would be 15% pa.

GRS

If a 45-year-old invested £350 a month in top dividend shares, here’s what they could have by retirement

Jon Smith outlines how an investor could make use of high-yielding dividend shares to accelerate the growth of a portfolio.

Posted by Jon Smith

Published 6 January

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.

Dividend shares are a great option for investors to consider when it comes to trying to build long-term gains to enjoy by retirement. Even if someone is starting out with no portfolio by the age of 45, there’s still plenty of time to make use of the stock market to build wealth. Here’s what a regular investment could build up to over time.

Little but often

I think some investors are surprised when they find out that there are large-cap stocks that currently have a dividend yield in excess of 10%. Even though some of these are quite risky, the point is that top dividend shares can offer lucrative yields.

The benefit of this is that each year, the dividends that get paid can be used to buy more of the same stock. This means that the following year, the amount made from dividends can increase, even without the investor putting more cash in. Over the course of the two decades before 65 comes around, the compounding impact can be significant.

Investing each month has the added benefit of meaning that hot stocks at that point in time can be purchased. If someone only bought shares at the beginning of each year, they could miss out on opportunities during the year. Yet by putting money to work more frequently, it provides more potential to jump on something in a timely manner.

A high-yield option

For example, a stock that some investors might want to consider as part of this strategy is  Assura (LSE:AGR). The UK-based real estate investment trust (REIT) focuses on buying, developing and then managing primary healthcare properties. This includes things such as GP surgeries and medical centres.

Over the past year, the share price has dropped by 19%, which has been a factor in pushing up the dividend yield to a generous 8.58%. The dividend per share payments have also been increasing for the past few years.

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.

The REIT generates money primarily through the rental income of the portfolio. This creates stable cash flow, which in turn can be used to pay out as dividends. The interim results showed a half-year payout of £44.7m, up from £42.5m from the same period last year.

One concern that has pushed down the share price is high interest rates. The company has a loan-to-value ratio of 49%. This means that almost half of a project is funded by cash, with the other half being debt. Naturally, the higher the interest rate, the higher the cost of taking on new debt.

Getting the numbers together

If a 45-year-old investor was in a position to invest £350 a month with a dividend portfolio yielding 8.5%, a portfolio could quickly build. Two decades later, this could be worth £221.3k. In theory, the following year this could generate £18.8k in income alone.

Income fund picks for your portfolio in 2025

23 December 2024

Fund selectors give their income fund picks for investors looking for high quality companies and growing dividends.

By Patrick Sanders

Reporter, Trustnet

  

Income funds remain a crucial component of many investors’ portfolios, particularly for those approaching retirement and looking for a steady source of income. However, income funds are not exclusive to older investors. Indeed, following a year of interest rate cuts, the outlook for income-focused strategies may be brightening.

Below, Trustnet asked fund selectors for their income fund suggestions for 2025.

Blackrock UK Income

In the home market, Jason Hollands, managing director at Evelyn Partners, saw potential in the £603m Blackrock UK Income fund as “the UK has long been a standout market for income seekers”.

Managed by Adam Avigdori and David Goldman, the portfolio targets companies with the potential to grow their dividends rather than businesses with high but stagnant yields. Hollands explained that this has led to attractive capital growth and performance compared to its competitors.

Indeed, the strategy has posted a top quartile return of 30.1% in the IA UK Equity Income sector over five years, along with a yield of 3.64%

Performance of the fund vs the sector and benchmark over 5yrs

Source: FE Analytics

Hollands added that the portfolio benefits from Avigdori and Goldman’s extensive experience and willingness to shift holdings “depending on the market environment and valuations”.

As a result, Hollands concluded that while the fund may lag in stronger markets, it held up better on the downside. For example, over the past five years, the portfolio was in the top quartile for volatility, maximum drawdown and downside risk.

M&G Global Dividend

For investors interested in the global market, Charlie McCann, investment analyst at Square Mile, pointed to the £2.2bn M&G Global Dividend fund.

McCann said: “We believe the fund is well placed to meet the changing demands of markets in 2025.”

With a dividend yield of 2.35%, the fund has been one of the 10 best-performing portfolios in the IA Global Equity Income sector over one, three, five and 10 years.

Performance of the fund vs the sector and benchmark over 10yrs

Source: FE Analytics

McCann explained that it had successfully grown the dividend over time, having achieved “more than 7% compound annual growth since its inception” and looks poised to continue growing in 2025.

Moreover, McCann said the fund benefits from a sensible investment process. The fund invests primarily in a core bucket of high-dividend stocks, supplemented by higher growth names and more cyclical parts of the market.

He explained that the allocation to each of these buckets shifted overtime in response to the current market backdrop, which allowed the fund to perform well during the market rally in the first half of 2024, while also beating the benchmark when the market broadened.

NextEnergy Solar

In the investment trust space, James Carthew, head of investment companies at QuotedData, was bullish on renewable energy and found the £373m NextEnergy Solar trust compelling.

Over three years the portfolio ranked in the second quartile of the IT Renewable Energy sector, although the tough backdrop for renewables – caused by higher interest rates – means the trust down by 18.7% in this period.

Performance of the trust vs the sector over 3yrs

Source: FE Analytics

However, Carthew concluded the portfolio was due for a turnaround. The trust operates at a 32% price discount compared to its net asset value (NAV), with a “whopping dividend yield” of 13.06%, which would be covered by 1.1x to 1.3x cash earnings.

Furthermore, Carthew explained that the company started a capital recycling plan in 2023, which has helped fund share buybacks and narrow the discount, which will provide the opportunity for a broad variety of new investments moving forward.

Guinness Asian Equity Income

Finally, Alex Watts, fund analyst at interactive investor, suggested the £266m Guinness Asian Equity Income fund for investors who exposure to the Asian market.

This fund has generally outperformed its sector, with a top quartile performance of 125.7% over the past 10 years. While it did slide into the second quartile over five years, it rallied and returned to the first quartile over three.

Watts added that with a 3.8% yield, it was one of the highest-yielding portfolios in its sector.

Performance of the fund vs the sector and benchmark over 10yrs

Source: FE Analytics

Watts said: “Towards the end of 2024, the region benefitted from early signs of a recovery of its largest market, China, as share prices reacted positively to a range of stimulus measures.”

Watts explained that the fund’s 38.4% weight to China has positioned it well to play on this recovery if it continues. However, it is otherwise well diversified with an equally weighted approach, preventing overexposure to any company.

Moreover, Watts argued that with most of the portfolio’s revenue based on the “economies and trade of the Asia Pacific region”, it was an attractive diversifier particularly for those wanted to move away from the concentrated US market.