Investors who remain hungry for yield will find some interesting options among the investment trusts in our Top 100 funds. Not only are there some high-yielding funds, but there are also several that pay dividends on a quarterly basis.
Research by Oriel Securities has found that the number of funds primarily investing in equities that have an historic yield of 4 per cent or higher has fallen sharply over the past three months. Four per cent or higher represents a significant premium to the yield on the FTSE All-Share index of 3.3 per cent.
Oriel calculates that, following the strong rally in markets and share prices, there are now only 14 funds yielding in excess of 4 per cent, compared with 23 back in November.
Two of these feature in our Top 100 funds list.
City of London Investment Trust (CTY), which primarily invests in UK blue-chip companies, has a yield of 4.2 per cent. City of London is issuing shares to take advantage of strong demand and avoid the premium getting excessive.
Edinburgh Investment Trust (EDIN) has a yield of 4.1 per cent and is managed by Neil Woodford, with a defensive bias in the portfolio, which has not been particularly helpful to relative performance over the past few months, but has worked well over the past three years.
Highest yielding investment trusts:
| Fund | Dividend yield (%) |
|---|---|
| Henderson High Income | 5.6 |
| Merchants Trust | 5.6 |
| Shires Income | 5.4 |
| European Assets Trust | 5.1 |
| BlackRock Commodities Income IT | 4.7 |
| Henderson Far East Income | 4.7 |
| British Assets | 4.6 |
| Middlefield Canadian Income | 4.6 |
| Dunedin Income Growth | 4.4 |
| City of London Investment Trust | 4.2 |
| Standard Life Equity Income Trust | 4.2 |
| Edinburgh Investment Trust | 4.1 |
| Scottish American | 4.1 |
| Schroder Income Growth | 4.1 |
| FTSE 100 | 3.5 |
| FTSE 250 | 2.6 |
Source: Oriel Securities as at 19 February 2013
Meanwhile, recent announcements from a number of investment trusts and investment companies suggest an increasing trend towards quarterly dividend payments. Witan Investment Trust, Foreign & Colonial Investment Trust, Lowland Investment Company, Standard Life Equity Income Trust and Henderson Global Trust are among those who have recently switched from twice yearly to quarterly dividend payments.
The Association of Investment Companies has identified 72 member investment companies that pay a quarterly dividend with the majority of these having an income focus, from the UK Growth & Income and Global Growth & Income sectors, through to the property sectors. These include several of our Top 100 funds (see table below). Again, City of London and Edinburgh Investment feature in the list.
F&C Commercial Property Trust (FCPT), also an IC Top 100 fund, goes even further in paying a monthly dividend.
Annabel Brodie-Smith, communications director at the Association of Investment Companies, said: "Dividend dates are important for many income-hungry investors, and this is particularly the case in the current low interest rate environment. So it's interesting to see a growing number of companies moving to quarterly dividend payments, suggesting that many investors favour a 'little and often' approach to income investing."
The AIC has published a list of companies paying quarterly dividends and publishes dividend payment dates for individual member companies on its website www.theaic.co.uk
IC Top 100 funds that pay quarterly dividends
| Investment company | AIC sector | Dividend dates | Yield (%) | Premium/Discount to Net Asset Value |
|---|---|---|---|---|
| Aberdeen Asian Income | Asia Pacific Excluding Japan | Apr Jul Oct Jan | 3.1 | 4.70% |
| City Natural Resources High Yield | Sector Specialist: Commodities & Natural Resources | Aug Nov Feb May | 2.3 | -15.50% |
| City of London | UK Growth & Income | Nov Feb May Aug | 4.3 | 2.20% |
| Edinburgh Investment | UK Growth & Income | Nov Feb May Jul | 4.2 | 2.60% |
| F&C Commercial Property | Property Direct- UK | Monthly | 5.8 | 4.40% |
| F&C Managed Portfolio Income | Global Growth & Income | Oct Jan Apr Jul | 4.2 | -3.20% |
| ISIS Property | Property Direct: UK | May Aug Nov Feb | 9.3 | -23.20% |
| JPMorgan Global Emerging Markets Income | Global Emerging Markets | Feb May Aug Nov | 3.8 | 1.90% |
| Mercantile | UK Growth | Aug Nov Feb May | 3.1 | -13% |
| Murray Income | UK Growth & Income | Jan Apr Jul Dec | 4.8 | 0.20% |
| Murray International | Global Growth & Income | Aug Nov Feb May | 3.7 | 4.40% |
| New City High Yield | UK High Income | Nov Feb May Aug | 6.0 | 3% |
| Perpetual Income & Growth | UK Growth & Income | Sep Dec Mar Jun | 3.6 | -1.20% |
| Personal Assets | Global Growth | Jan Apr Jul Oct | 1.6 | 1.60% |
| UK Commercial Property | Property Direct: UK | May Aug Nov Feb | 7.7 | 0.50% |
| Utilico Emerging Markets | Global Emerging Markets | Sep Dec Mar Jun | 3.2 | -6.10% |
Source: Association of Investment Companies as at 19 February 2013
