At a time of interest rate cuts and poor returns from bonds equity income funds can be a good option for income seekers. But even if a fund has an attractive yield and dividends, if it is losing your capital or not keeping up with other viable options, it is probably not worth investing in.
IC TIP:
Sell
at
434.45p
Tip style
Income
Risk rating
Medium
Timescale
Long Term
Bull points
- Attractive dividend stream
- Low ongoing charge
Bear points
- Poor total returns and under performance
- High level of expensive debt
- CAGR below peer group
- Has struggled to cover dividend
Merchants Trust (MRCH), which offers an attractive yield of 5.6 per cent, looks like an example of this. It has increased its dividend for 34 consecutive years, with the total payment of 24p in its last financial year an increase of 0.8 per cent on the year before, and fully covered by earnings. The trust can also use call options to enhance its income.