Join our community of smart investors

Poor returns a high price for Merchants Trust's income

Merchants Trust pays good dividends but its total returns have not been good
August 18, 2016

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.

This is subscriber only content
Start your trial to keep reading
PRINT AND DIGITAL trial

Get 12 weeks for £12
  • Essential access to the website and app
  • Magazine delivered every week
  • Investment ideas, tools and analysis
Have an account? Sign in