(“Custodian Property Income REIT” or “the Company”)
Active asset management continues to drive income and valuation growth, underpinning fully covered dividend
Custodian Property Income REIT (LSE: CREI), which seeks to deliver an enhanced income return by investing in a diversified portfolio of smaller, regional properties with strong income characteristics across the UK, today provides a trading update for the quarter ended 31 March 2025 (“Q4” or the “Quarter”) and the year ended 31 March 2025 (“FY25”).
Commenting on the trading update, Richard Shepherd-Cross, Managing Director of the Investment Manager, Custodian Capital Limited, said: “This Quarter’s performance further emphasised the benefits of portfolio diversification, which combined with our hands on approach to generating strong income growth, has helped support three consecutive quarters of capital appreciation.We believe the current discount provides an attractive entry point for investors, especially given our long track record of fully covering the dividend, with shares currently yielding around 8%.The 17 lettings, lease renewals, re-gears and rent reviews we completed during the Quarter were achieved at significant aggregate premiums to ERV and previous rent, and our ongoing investment in solar panels at our properties has begun to prove its worth as a potential source of future revenue and value creation.
“We also believe that during periods of trade uncertainty such as the one the world now finds itself in, it would not be unreasonable to view UK real estate as a relatively safe haven for investors seeking stable asset backed income in established and secure jurisdictions.This should be particularly true for the Company’s diversified investment strategy that generally targets sub £10m, higher yielding, regional assets across the UK, that principally serve a local and/or domestic market.”
Highlights
Strong leasing activity continues to support rental growth, underpinning fully covered dividend
1.5p dividend per share approved for the Quarter, achieving aggregate FY25 dividends per share of 6.0p, in line with target, and fully covered by unaudited EPRA earnings per share
Target dividends per share of no less than 6.0p for the year ending 31 March 2026. This target dividend represents a 7.9% yield based on the prevailing 76p share price
EPRA earnings per share of 1.6p for the Quarter (Q3: 1.5p)
EPRA occupancy decreased to 91.1% (31 Dec 2024: 93.4%), primarily due to a previously flagged industrial unit becoming vacant in Biggleswade, which provides an opportunity to refurbish and improve the rental rate, and an office in Sheffield where we are assessing the options. The industrial asset in Biggleswade is already under offer to let subject to a refurbishment. 4.0% of estimated rental value (“ERV”) is vacant and being or about to be refurbished or under offer to let or sell (31 Dec 2024: 1.8%)
During the Quarter, this decrease in occupancy resulted in a 1.2% decrease in like-for-like passing rent. However, like-for-like ERV increased by 1.5%, primarily driven by 2.1% like-for-like growth in the industrial sector
Significant potential for further income growth with the portfolio’s ERV of £50.2m exceeding the current passing rent of £43.9m by 14% (31 Dec 2024: 11%). Approximately 30% of this reversion is available from leasing events with the remainder from letting vacant space. Based on our track record and occupier demand for space, we expect to capture this potential rental upside at (typically) five-yearly rent reviews or on re-letting, with an opportunity to do so across c. 17% of the portfolio’s income in FY26. We expect to also continue to drive passing rent and ERV growth further through asset management initiatives
Leasing activity during the Quarter comprised the completion of two rent reviews at an average 31% increase in annual rent, nine lease renewals and regears in aggregate 11% ahead of ERV and 13% ahead of the previous rent, and letting six vacant units
Valuations growing across the Company’s c.£594m portfolio, with a 1.2% uptick on a like-for-like basis
Q4 net asset value (“NAV”) total return per share of 3.4%
NAV per share grew by 1.8% to 96.1p (31 Dec 2024: 94.4p) with a NAV of £423.5m (31 Dec 2024: £416.1m)
The value of the Company’s portfolio of 151 assets at the Quarter end was £594.4m (31 Dec 2024: £586.4m), a like-for-like increase of 1.2% during the Quarter, net of £0.8m of capital expenditure. Benefitting from a diversified portfolio, during FY25, the Company has seen a like-for-like portfolio valuation increase of 2.2%
Savers might be surprised at how much they need in their pension pot to fund this.
Figures we plugged into MoneyHelper’s annuity comparison tool showed a 65-year-old would need a pension pot of around £545,000, if they wanted to purchase an annuity that paid out enough each year to fund a comfortable retirement (i.e. just over £43,000 per year).
The amount will vary depending on your health and the sort of annuity product you want to buy, as well as market annuity rates at the point of purchase.
The quote we generated assumes the 65-year-old is in good health, and wants to purchase a single-life level annuity.
Discover the safe, simple way to lock insteady monthly dividends up to 10% right now!
Dear Reader,
You’ve no doubt heard pundit after pundit say that you need at least a million dollars to retire well.
Heck, we’ve all heard it so often, I bet it’s the first number most people think of when someone says “retirement savings”!
Let me explain why this endlessly repeated fallacy is dead wrong. You’ll actually need a lot less than that.
I’m talking about just $600,000. And in some parts of the country you could easily do it on less: a fully paid-for retirement for just $500,000.
Got more? Great. I’ll show you how you can retire filthy rich on your current stake.
I know that sounds ridiculous in these inflationary times, but stick with me for a few moments and I’ll walk you straight through it.
The key is my “8% Monthly Payer Portfolio,” which lets you live on dividends alone—without selling a single stock to generate extra cash.
And you’ll get paid the same big dividends every month of the year – so that your income and expenses will once again be lined up!
This approach is a must if you want to quickly and safely grow your wealth and safeguard your nest egg through the next market correction, too!
This isn’t just a dividend play, either: this proven strategy also positions you to benefit from 10%+ yearly price upside potential, in addition to your monthly dividends.
That’s the Power of Monthly Dividends
We’ll talk more about that price upside shortly. First, let’s set up a smooth income stream that rolls in every month, not every quarter like the dividends you get from most blue-chip stocks.
You probably know that it’s a pain to deal with payouts that roll in quarterly when our bills roll in monthly.
But convenience is far from the only benefit you get with monthly dividends. They also give you your cash faster—so you can reinvest it faster if you don’t need income from your portfolio right away.
More on that a little further on. First I want to show you…
How Not to Build a Solid Monthly Income Stream
When it comes to dividend investing, many “first-level” investors take themselves out of the game right off the hop. That’s because they head straight to the list of Dividend Aristocrats—the S&P 500 companies that have hiked their payouts for 25 years or more.
That kind of dividend growth is impressive. But here’s the problem: these folks are forgetting that companies don’t need a high dividend yield to join this club—and without a high, safe payout, you can forget about generating a livable income stream on any reasonably sized nest egg.
Worse, you could be forced to sell stocks in retirement—maybe even into the kind of plunges we saw in March 2020 or throughout 2022—just to make ends meet.
That’s a nightmare for any retiree, and leaning too hard on the so-called Aristocrats can easily make it a reality: the ProShares S&P 500 Dividend Aristocrats ETF (NOBL), which holds all 69 Aristocrats, still yields just 2% as I write this.
Solid Monthly Payers Are Rare Birds …
You can certainly build your own monthly income portfolio, and the advantage of doing so is obvious: you can target companies that pay more than your average Aristocrat’s paltry payout.
Trouble is, only a handful of regular stocks pay in any frequency other than quarterly, so we’ll have to patch together different payout schedules to make it happen.
To do that, let’s cherry-pick a combo of well-known payers and payout schedules that line up. Here’s an “instant” 6-stock monthly dividend portfolio that fits the bill:
Procter & Gamble (PG) and AbbVie (ABBV) with dividend payments in February, May, August and November.
Target (TGT) and Chevron (CVX), with payments in March, June, September and December.
Sysco (SYY) and Wal-Mart Stores (WMT), with payments in January, April, July and October.
Here’s what $600,000 evenly split across these six stocks would net you in dividend payouts over the first six months of the calendar year, based on current yields and rates:
You can see the consistency starting to show up here, with payouts coming your way every single month, but they still vary widely—sometimes by $1,025 a month !
It’s pretty tough to manage your payments, savings and other needs on a lumpy cash flow like that.
And the bigger problem is that we’re pulling in $17,300 in yearly income on a $600,000 nest egg. That’s not nearly enough for us to reach our ultimate goal of retiring on dividends alone, without having to sell a single stock in retirement.
We need to do better.
Which brings me to…
Your Best Move Now: 8%+ Dividends AND Monthly Payouts
This is where my “8% Monthly Payer Portfolio” comes in. With just $600,000 invested, it’ll hand you a rock-solid $48,000-a-year income stream. That could be enough to see many folks into retirement.
The best part is you won’t have to go back to “lumpy” quarterly payouts to do it !
Of all the income machines in this unique portfolio, nearly half pay dividends monthly, so you can look forward to the steady drip of income, month in and month out from these plays.
That’s How This Grandma Makes
$387,000 Last Forever
A while back, I was chatting with a reader of mine who manages money for a select group of clients. He’d been using my Monthly Payer Portfolio to make a client’s modest savings – a nice grandmother who came to him with $387,000 – last longer than she ever dreamed:
“She brought me $387,000,” he said. “And wants to take out $3,000 per month for 10 years.”
The result? The last time I’d spoken with him, it had been over seven years since she started her $3,000 per month dividend gravy train. In that time, she’d taken out a fat $252,000 in spending money.
And that nest egg ? Well, it’s going strong. Last time I checked in with this reader, she was still sitting on more than $258,000 after seven years and $252,000 worth of withdrawals.
Grandma’s Monthly Dividend Gravy Train
Her investments pay fat dividend checks that show up about every 30 days, neatly coinciding with her modest living expenses. And the many monthly dividend payers she bought dish income that adds up to 5%, 7% and even 8% or more per year.
There’s no work to it; these high-income investments provide a “dividend pension” every month.
I’m ready to give you everything you need to know about this life-changing portfolio now. Let’s talk about Grandma’s secret – her high-yielding monthly dividend superstars (which even have 10%+ price upside to boot!)
Monthly Dividend Superstars:
8% Annual Yields With
10%+ Price Upside, Too
Most investors with $600,000 in their portfolios think they don’t have enough money to retire on.
They do – they just need to do two things with their “buy and hope” portfolios to turn them into $4,000+ monthly income streams:
Sell everything – including the 2%, 3% and even 4% payers that simply don’t yield enough to matter. And,
Buy my favorite monthly dividend payers.
The result? More than $4,000 in monthly income (from an average annual yield just over 8%, paid about every 30 days). With upside on your initial $600,000 to boot!
And this strategy isn’t capped at $600,000. If you’ve saved a million (or even two), you can just buy more of these elite monthly payers and boost your passive income to $6,660 or even $13,320 per month.
Though if you’re a billionaire, sorry, you are out of luck. These Goldilocks payers won’t be able to absorb all of your cash. With total market caps around $1 billion or $2 billion, these vehicles are too small for institutional money.
Which is perfect for humble contrarians like you and me. This ceiling has created inefficiencies that we can take advantage of. After all, in a completely efficient market, we’d have to make a choice between dividends and upside. Here, though, we get both.
Inefficient Markets Help Us
Bank $100,000 Annually (per Million)
Fortunately for you and me, the financial markets aren’t 100% efficient. And some corners are even less mature and less combed through than others.
These corners provide us contrarians with stable income opportunities that are both safe and lucrative.
There are anomalies in high yield. In an efficient market, you wouldn’t expect funds that pay big dividends today to also put up solid price gains, too.
We’re taught that it’s an either/or relationship between yield and upside – we can either collect dividends today or enjoy upside tomorrow, but not both.
But that’s simply not true in real life. Otherwise, why would these monthly payers put up serious annualized returns in the last 10 years while boasting outsized dividend yields?
For example, take a look at these 5 incredible funds that pay monthly and soar:
This is the key to a true “8% Monthly Payer Portfolio” – banking enough yields to live on while steadily growing your capital. It’s literally the difference between dying broke and never running out of money!
But I’m not suggesting you run out and buy these funds.
Some have been on my watchlist and in our premium portfolios over the years, but I mention them only as examples of the potential ahead.
My name is Brett Owens and I’m an unabashed dividend investor. Ever since my days at Cornell University and all through my years as a startup founder in Silicon Valley, I’ve hunted down safe, stable, meaningful yields.
How compounding works and why it’s your most powerful wealth-building tool Story by Becky Wilding
The Independent
Compounding is the secret to how the rich get richer. Or, as Benjamin Franklin put it, “Money makes money. And money that makes money, makes money.”
What is compounding?
Compounding is easiest to explain through an example:
If you leave £10,000 in a savings account for one year at an interest rate of 5 per cent, you’ll earn £500 in interest. Now you have £10,500.
Keep this £10,500 in the same savings account for another year, and this time you’d earn £525 in interest. Keep doing the same, and by year 16, you’d be earning over £1,000 a year in interest. By year 30, you’d earning over £2,000 a year.
At this point, your £10,000 savings would have turned into £40,000 – without you paying in a penny more: The earned money itself begins to earn money.
This is how compounding works: Leave your money untouched, allow it to generate a return, and then generate a return on that initial return.
How powerful is compounding?
Albert Einstein is attributed to the quote of compound interest being “the eighth wonder of the world” – so, pretty powerful. But again, it’s easiest to understand the power of compounding using examples with real monetary amounts.
In your sixth year of saving, you would earn ten times more interest than your first year.
During year one, you’d pay in £2,400 in total and your annual interest would be £70. But in year six, while you’d still pay in £2,400 in total, your interest that year would be £760.
By year 15, your savings would grow more through interest than through your actual payments. You’d still be paying in £2,400 a year, but your interest that year would be £2,500 – and it would continue to grow in every subsequent year, as the chart below from helpfulcaculators.com shows.
Compounding shown visually, via helpfulcalculators.com (helpfulcalculators.com)
After 26 years, you would have doubled your money with the interest accrued.
You would have paid in £62,400 in total, and you would have earned interest of £64,300. This gives you a total of £126,700.
Consistency, and time, are the key factors at play – along with a constant rate of interest in this example, which is of course one factor out of your control.
How does compounding work with investments?
When we’re talking about compounding in the context of savings (or interest-bearing securities), as in the example above, we specifically mean compound interest. If we’re talking about investments, we’re discussing compound returns.
The same principle applies: if you reinvest your returns (e.g. capital gains or dividend payments), your subsequent returns will be based on a higher capital amount. For example, if you invested £10,000 and made gains of £700 in year one, you’d have £10,700 to invest in year two.
Compound returns are not so easy to forecast. A seven per cent gain in year one does not ensure a seven per cent gain in year two. Your actual gain could be higher, lower, or even negative.
However, an investor pursuing compound returns would have little concern for a negative return in year two. This is a long-term investment strategy, and occasional losses are to be expected in any such strategy; these tend to be balanced out by better returns in other years.
Which is better: saving or investing?
Having read the examples above, you might be drawn to the certainty of savings over the unpredictability of investments. However, you should note that our savings example uses an interest rate of five per cent, for simplicity.
But it would be very unusual for cash savings accounts to offer this rate year after year for thirty years. Interest rates fluctuate and can sink to near zero for years at a time.
Inflation would also diminish the buying power of your savings each year. Just to keep pace with inflation, you would need to double your money every 30 years.
Historically, your best chance to beat inflation has been by investing in equities. This asset class does not produce a consistent annual return, but over long periods, is expected to deliver average returns of seven to ten per cent. That means it’s possible to achieve a real return (in other words, adjusting for inflation) of around 5 per cent.
How can you take advantage of compounding?
Luckily, taking advantage of compounding is not hard work. The main requirement is patience…and actually starting. There are a few other pointers you should consider:
Start as soon as you can
Invest in a fund or diverse portfolio of equities
Maintain regular payments into your portfolio
Stay invested for many years, avoiding withdrawals
Regularly review your portfolio performance
And remember – you don’t have to start with huge amounts either, you just have to start.
If you think investing is easy, you are in for a big wake up call.
One reason, looking at the chart above, to rebalance your portfolio.
Above even if you took out your profit of around ten percent Mr. Market has taken that back and some more. Although you would have received dividends to re-invest in your Snowball.
The Board of Octopus Renewables Infrastructure Trust plc is pleased to declare an interim dividend in respect of the period from 1 January 2025 to 31 March 2025 of 1.54 pence per ordinary share, payable on 30 May 2025 to shareholders on the register at 16 May 2025 (the “Q1 2025 Dividend”). The Q1 2025 declared payment is in line with the Company’s dividend target for the financial year from 1 January 2025 to 31 December 2025 (“FY 2025”) of 6.17 pence per Ordinary Share*. The ex-dividend date will be 15 May 2025.
The Company has a progressive dividend policy and the dividend target for FY 2025 represents an increase of 2.5% over FY 2024’s dividend, in line with the increase to the Consumer Price Index (CPI) for the 12 months to 31 December 2024. This marks the fourth consecutive year the Company has increased its target in line with inflation.
Wall Street Missed This. We Didn’t (We’re Cashing in With 7% Dividends)
Brett Owens, Chief Investment Strategist Updated: May 6, 2025
It’s no secret this economy is slowing—at least in the near term. That’s given us contrarians a (time-limited!) buy window on the “dividend twofer” we’re going to dive into today.
One of the tickers we’ll talk about below pays a sturdy 7% now. The other yields 4.9% and sports a source of upside no one has noticed (except us, of course!).
Both are utility plays, which tend to rise as the economy slows, lowering interest rates as it does. Let’s get into this opportunity, starting with last week’s GDP report, which said, yes, the US economy did shrink to start the year.
Slowdown Adds to Utilities’ Upside
Sure, GDP growth slowed in the first quarter, to the tune of 0.3%. But the underlying numbers were actually more bullish than the headlines suggested.
That’s because the pullback was in large part due to a spike in imports as retailers stocked up ahead of Trump’s tariffs—and imports are calculated as a drag on GDP. That trend is likely to fade. Government spending also dropped in light of DOGE cuts, while consumer spending largely held up.
We’ll take a GDP dip caused by temporary factors like import spikes ahead of tariffs and a likely one-off drop in government spending.
But the truth is, a slowdown (even if a mild one) is likely. More evidence came in last week’s initial jobless claims, which came in at 241,000 for the week ended April 26, above the 225,000 expected.
“Trump Put” on Interest Rates Works in Our Favor
This tariff situation is changing daily (hourly?), with the “Liberation Day” levies on, then off. Then electronics were exempt from China tariffs. And more recently, levies from car parts were waived for vehicles built in the US.
More dovish moves are likely on the trade front. But wherever we land, tariffs will be higher than they were pre-January 20. They’re a key part of Treasury Secretary Scott Bessent’s three-part plan to bring down interest rates:
Tariffs, to slow growth (and with it inflation).
Deregulation, to help offset the tariff drag, and …
Drilling, to bring down energy prices.
But as we’ve written before, Bessent is focused on the 10-year Treasury rate, benchmark for business and consumer loans of all types.
Case in point: When the yield on the 10-year famously spiked in early April, Trump (no doubt hearing Bessent’s pleas) put the bulk of the Liberation Day tariffs on pause.
In other words, we’ve finally found the “Trump Put” for stocks—but it isn’t in the stock market. It’s in the bond market!
That push for lower rates is a rare policy-driven tailwind we’re happy to take advantage of. And as we’ll see below, high-yielding utility stocks are a great way to do so.
The 10-year knows the story on the latest economic numbers, too. Because beyond the GDP report, the personal consumption expenditures (PCE) index, the Fed’s favorite inflation gauge, also came out last week. And it actually dipped from a year ago, to 2.3% from 2.7%.
Ten-year Treasury rates fell in response—as you’d expect from a bond market anticipating an economic slowdown.
A slowdown is not great news, of course, but there is a silver lining for us: It gives us the chance to buy those two high-yielding utilities now, before their next leg up.
Utility Pick No. 1: Reaves Utility Income Fund (UTG)
We’ve talked about the Reaves Utility Income Fund (UTG) many times before, and with good reason. It’s returned a sweet 41% for members of my Contrarian Income Report service since we added it to our portfolio in June 2023—less than two years ago.
As the name says, UTG holds utility stocks—mainly top US names like Entergy Corp. (ETR), Xcel Energy (XEL) and CenterPoint Energy (CNP), as well as “utility-like” firms such as pipeline operator Enterprise Products Partners (EPD).
Let’s take a look at that holding period for a second; it clearly shows that every time the 10-year rate tops and moves lower, UTG goes from trading at a discount to net asset value (NAV)—the key valuation metric for CEFs—back to premium territory:
UTG’s Discount (or Premium!) Lets Us “Surf” the 10-Year Rate
With a slowdown ahead, I expect UTG’s current par valuation to move into premium territory. That amounts to gains to go with the fund’s 7% dividend—a payout that rolls in monthly, is rock-steady—and even offers a hint of growth (and special dividends):
That “recession-resistant” income stream, potential for a higher premium (and gains) as the economy slows, and lower volatility (UTG sports a “beta” rating of 0.84, meaning it’s 16% less volatile than the S&P 500), make it a smart buy now.
Utility Pick No. 2: Dominion Energy (D)
If you’re looking to go the single-stock route, consider Virginia-based Dominion Energy (D), which provides electricity to 3.6 million homes and businesses in Virginia (hold that thought!), North Carolina and South Carolina. It also pipes natural gas to about 500,000 users in South Carolina. The stock yields 4.9%.
Utilities have been among the few sectors to hold their own this year, and D has done the same—though it has trailed the sector (shown below in orange by the benchmark utility index fund, XLU):
D’s “Utility Lag” Is the First Sign It’s a Bargain …
Long-time readers will know that this is because D is still in the “dividend doghouse” for a cut management brought in back in 2020 (showing just how long dividend investors’ memories are!)
The reason back then was too much debt. But here’s the thing: Unless management is a complete clown show (which D’s is certainly not), the safest dividend is often the one that’s been recently cut. And D has more than served its payout penance, with the dividend holding its own (and even being hiked once) since.
Nonetheless, the company’s share price fell behind the payout once the cut was made. Given the tendency for share prices to track dividend growth higher, that lag is the second sign we’re getting a deal here:
Lagging Share Price Is Our Second “Bargain Barometer” …
Lastly on the bargain front, D trades at 16.6-times forward earnings, below its five-year average of 19.3—though a strong earnings report last week has pushed that up, making our buy here a bit more urgent.
… And Its Below-Average (But Rising) P/E Is the Third
Frankly, it’s about time investors started to forgive and forget. For one of the main reasons why, let’s swing back to Virginia, D’s home state. As you may know, Virginia is ground zero for the data-center boom that’s supporting AI’s ongoing growth.
And it’s not just AI: Electric cars continue to hit the road, too. And more consumers are looking to heat pumps—a shift that’s baked in, no matter what happens in Washington. Dominion is likewise projecting a doubling of demand for its power by 2039.
The company is also relatively insulated from tariffs. It does expect to pay around $123 million in steel and aluminum levies on its Coastal Virginia Offshore Wind project. But that’s a small slice of the project’s $10.8-billion price tag and the $4.1 billion of revenue D generated in Q1 alone. And of course, the tariffs could always be cut or removed.
Which investment trusts could benefit from lower interest rates?
As vehicles for long-term investments, many investment trusts were hit when interest rates rose in 2022. With interest rates expected to fall by the end of the year, could now be the time to invest in one of these unloved sectors?
(Image credit: Craig Hastings via Getty Images)
By Dan McEvoy
Investment trust investors will have seen their discounts widen over recent years, and this is largely due to the rapid increase in interest rates that began in 2022.
The Bank of England’s Monetary Policy Committee (MPC) holds its next interest rates meeting this Thursday, and most analysts are forecasting that it will cut rates. The main debate is over the size of the cut, with consensus settling around a 25 basis point (bps) cut but some analysts thinking the MPC will go further and cut rates by fifty bps.
Even if the MPC holds rates steady at this meeting, the trajectory at present is downwards. While an inflationary shock could change the picture, it’s expected that interest rates will be lower at the end of the year than they are right now – perhaps as low as 3.25%.
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Rising interest rates hit some sectors, such as property or renewable energy infrastructure, particularly hard. But now, with rates starting to fall, “many analysts believe their prospects are looking brighter and there has been a surge of M&A activity in these sectors,” says Annabel Brodie-Smith, communications director at the Association of Investment Companies (AIC).
The AIC, which represents around 300 of the UK’s investment trusts, has polled analysts and investment trust experts about the sectors that they believe could benefit from an environment of falling interest rates. Here, MoneyWeek dives into their findings to highlight the sectors and trusts that could be set to gain if interest rates fall.
Infrastructure
Infrastructure investments could benefit in a lower-rate environment. Infrastructure projects tend to be very long-term investments, and as such investment trusts make a particularly effective means of gaining exposure.
When valuing an infrastructure investment, most professional investors use a formula called net present value to calculate how much a given project is worth today. One of the key inputs in this formula is the interest rate: the higher this is, the greater the present value of a long-term project is discounted (because higher interest rates mean that safer assets like bonds offer higher returns over time).
So falling interest rates serve to increase the present value of long-term infrastructure assets by reducing the discounting effect of interest rates.
“This discount rate effect would be more meaningful for longer life, lower risk ‘core’ economic infrastructure assets such as water, energy, transport and accommodation investments,” says Ashley Thomas, analyst at Winterflood Securities.
Thomas recommends HICL Infrastructure (LON:HICL) which invests predominantly in these areas and has 65% of its portfolio invested in the UK.
Alternatively, Thomas highlights BBGI Global Infrastructure (LON:BBGI) which invests in similar sectors but with a more global outlook, as only 33% of assets are UK-based.
Markuz Jaffe, analyst at Peel Hunt, and Colette Ord, head of real estate, infrastructure and renewable funds research at Deutsche Numis, both highlight International Public Partnerships (LON:INPP).
Ord argues that the 22% discount it currently trades at doesn’t reflect its portfolio’s return potential, and points out that “the current dividend yield of 7.7% is fully covered by earnings, and even if no further investments are made, the company could pay a growing dividend for at least a further 20 years”.
“The portfolio is around 73% weighted to the UK and some of the investments benefit from government-backed cash flows, so there is a beneficial link to reductions in gilt yields, and any impact this might have on underlying asset pricing,” adds Jaffe.
Renewable energy
Energy is of course a sub-set of the broader infrastructure sector, but renewable energy investments in particular suffered when interest rates started rising in 2022, and as such could be big beneficiaries as interest rates fall.
Bluefield Solar Income Fund (LON:BSIF) is another of Winterflood’s picks highlighted by Thomas as a renewable energy infrastructure pure play. 100% of its investments are UK-based.
One of the most popular renewable energy investment trusts is Greencoat UK Wind (LON:UKW), which “offers a pure play on the UK wind sector… and has built a strong track record of cash generation”, according to Jaffe.
Jaffe highlights that UKW’s board recently committed an extra £100 million to its share buyback program to take the total to £200 million, “one of the largest in the listed infrastructure investment company universe”. He also highlights the trust’s 22% discount to its end-of-March NAV, and 8.8% yield.
For an even deeper discount and greater yield, consider Foresight Solar Fund (LON:FSFL). This is currently trading at a 30% discount to NAV and offering a 10% yield.
The trust “offers exposure to a portfolio of solar assets located across the UK, Spain and Australia, with a development pipeline of Spanish battery energy storage system (BESS) and more solar projects,” says Rachel May, research analyst at Shore Capital.
“The board has been extremely proactive in its attempts to narrow the discount having recently announced that a further 75MW of projects have been identified for disposal,” May adds, highlighting the ongoing sales process for tis Australian portfolio and the sale of a 50% stake in its Spanish holdings at a 21% premium to book value.
Property
Real estate investment trusts (REITs) are a mainstay among investment trust and property investors. Low interest rates are generally good news for the property market: they reduce mortgage rates, thereby increasing demand for property and pushing up property prices.
It is worth bearing in mind too that a distinctive feature of investment trusts is that they can borrow money to leverage their investments, a practice called “gearing”. This debt is also subject to interest rate changes, and investment trusts with variable-rate debt can stand to benefit when interest rates fall.
“A cut in e Bank of England base rate correspond with a reduction in the sterling overnight index average rate, or SONIA, reducing debt costs for funds with unhedged floating rate debt using SONIA as a reference rate,” explains Emma Bird, head of investment trusts research at Winterflood Securities.
As such, Bird recommends Custodian Property Income REIT (LON:CREI). 18% of its debt is subject to a variable, SONIA-linked rate, so the trust “should therefore see reduced debt costs and subsequently higher earnings as SONIA falls”.
Growth assets
Companies that are positioned for long-term growth are also hit by higher interest rates, for similar reasons to companies in the sectors above: namely, their returns are likely to take a long time to come around, and as such higher rates decrease their attractiveness relative to safer investments like gilts.
Growth assets could take the form of early-stage companies, which are likely to be private. For exposure to these, Jaffe recommends HarbourVest Global Private Equity (LON:HVPE) which uses a fund-of-funds structure to offer exposure to global private companies.
HVPE’s discount increased from 15% in early 2022 to over 50% by October the same year. It is currently around 43%, but Jaffe says that the trust is taking steps to address this.
“The distribution pool, which supports buyback activity, has seen its allocation doubled from 15% to 30%, the investment structure is to be simplified via a dedicated separately managed account with HarbourVest Partners, and a continuation vote is being introduced for the 2026 AGM,” he says.
There are also nascent industries that could take many years to recuperate significant sunk costs, but for some of them, not even the sky will be the limit from there.
Ord picks out Seraphim Space Investment Trust (LON:SSIT) and its portfolio of space technology companies.
Lower interest rates could well improve sentiment around its capital-intensive portfolio of companies, but “perhaps more significant than the change in interest rates is a focus on defence spending,” she says.
This 10-stock ISA portfolio could yield £1,380 in passive income a year
Here’s a portfolio of dividend shares that could produce £115 of monthly passive income for investors who maximise their ISA contribution limit.
Posted by
Charlie Carman
PHP
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Diversification is a crucial consideration for passive income investors.. Since companies can cut or halt dividend payments at any moment, it’s important not to have all your eggs in one basket.
There’s no magic rule about the minimum number of dividend stocks required for a diversified portfolio. However, 10 shares or more is a good starting point. At this level of variety, there’s reduced exposure to the specific risks associated with any single company.
With that in mind, here’s a sample Stocks and Shares ISA portfolio investors could consider building to aim for £1,380 in annual passive income.
High-yield dividend shares
To reach this dividend income goal from a £20k ISA, investors would need a 6.9% yield across their holdings. Given that the FTSE 100 average is only 3.6%, buying high-yield stocks will be required. A simple index tracker would fall well short.
To illustrate the kinds of stocks I’m talking about, investing £2,000 in each of the UK companies listed below would hit the passive income target. I’ve selected this sample portfolio from FTSE 100 and FTSE 250 shares. In the spirit of diversification, it covers different areas of the market, from banking to pharmaceuticals, media to water, and beyond.
Stock
Dividend yield
Aviva
6.63%
BP
6.51%
British American Tobacco
7.52%
GSK
4.48%
HSBC
6.17%
ITV
6.35%
Johnson Matthey
6.35%
Legal & General
8.55%
Primary Health Properties
6.95%
Sainsbury’s
5.18%
Severn Trent
4.30%
I reckon it’s a credible mix of quality dividend stocks, giving prospective investors plenty to chew over. Furthermore, I didn’t blindly pick the highest yields I could find, which is a common mistake for novice stock pickers.
Buying shares based on their yields alone overlooks other essential qualities, such as dividend cover, distribution histories, and the fundamental health of the business behind the headline yield figure.
That’s not to say these firms pay sure-fire dividends. There’s no such thing. But it’s a nice snapshot of top UK dividend shares to consider buying, and I hold some myself.
A lesser-known FTSE 250 stock
One of my choices that may be less familiar to readers is Primary Health Properties (LSE:PHP). With 29 consecutive years of dividend increases to its name and a yield just shy of 7%, this real estate investment trust (REIT) should capture the attention of passive income investors.
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The company’s portfolio is concentrated in long-term leasehold and freehold interests in modern primary healthcare facilities. A recent £22.6bn funding increase for NHS England is a big tailwind for the REIT, considering 89% of its rent roll comes from government bodies. Coupled with anticipated interest rate cuts, macro conditions look encouraging for share price growth.
I also like the steady upward trajectory of Primary Health Properties’ financial results. Net rental income and adjusted earnings per share have improved year on year for at least five years. Growth opportunities in Ireland are another attractive point. The Emerald Isle is the company’s “preferred area of investment” today.
Admittedly, the balance sheet could be in better shape. Net debt of £1.32bn looks uncomfortably high measured against a market cap of £1.35bn. This raises questions over the dividend’s sustainability. Nonetheless, on balance, I think favourable market fundamentals mean the future looks bright for this income stock.
PHP currently up 18% from its recent low, so a lot of people sitting on a decent profit, so that could mean profiting taking may hit the share if there is bad market news.
The Independent
