Join our community of smart investors

11 equity trusts still yield over 4%, despite market rises

A rebound in share prices has reduced the number of equity investment trusts with a yield over 4 per cent to 11
April 12, 2017

The number of equity investment trusts yielding more than 4 per cent has fallen from 14 last August following a rebound in share prices across the market, reports broker Stifel. Many trusts benefited as sterling devalued in the second half of last year following the UK's vote to leave the European Union (EU), resulting in a boost to share prices but a fall in yields. However, there are still 11 trusts which yield more than 4 per cent and four which yield more than 5 per cent: European Assets (EAT) on 6.5 per cent, Henderson Far East Income (HFEL) on 5.6 per cent, BlackRock Commodities Income (BRCI) on 5.2 per cent and Merchants (MRCH) on 5.2 per cent.

European Assets' yield of 7.4 per cent in August 2016 has fallen, partly due to its volatile share price since then. Over one year to 10 April, the trust has returned 16.02 per cent, underperforming the Association of Investment Companies (AIC) European Smaller Companies sector average.

The trust's high conviction portfolio of smaller- and medium-sized companies was negatively affected in 2016 after the UK's vote to leave the EU took a toll on European stocks. But since the start of the year, those stocks have recovered and the trust's share price has rallied strongly, although it still trades at a discount to net asset value (NAV) of 2 per cent.

European Assets pays some of its income out of capital, meaning it partly relies on capital growth to pay dividends.

Blackrock Commodities Income Investment Trust's yield of 8.2 per cent in August 2016 has also fallen. The trust has experienced a surge in its share price performance over one year, as mining and commodity stocks have rebounded from their 2015 lows. But the trust was forced to cut its dividend last year due to dividend cuts across the mining sector in 2015.

Other trusts that still have a yield of more than 4 per cent include Henderson High Income (HHI), Dunedin Income Growth (DIG) and Murray Income (MUT). Dunedin Income Growth trades on a 10 per cent discount to NAV, despite returning 24.6 per cent over one year to 10 April, ahead of the FTSE All-Share's return of 22.5 per cent. Murray Income is also on a discount of about 10 per cent and has returned 23.7 per cent over one year, narrowly beating the FTSE All-Share.

The two lowest-yielding trusts in the group are Murray International (MYI) and Aberdeen Asian Income (AAIF), with respective yields of 4 per cent and 4.1 per cent. Murray International's performance improved significantly in 2016 after two years of weaker performance, and its share price also recovered resulting in its yield falling. The trust's manager, Bruce Stout, invests in global equities and bonds, which include some emerging markets securities. These had weighed on performance, but more recently have done well. Murray International's 2016 dividend of 47.5p is a 2.2 per cent increase on its 2015 dividend.

Four equity trusts, which had a yield above 4 per cent in August 2016, have fallen below this level. These are Blackrock Latin American (BRLI), Schroder Income Growth Fund (SCF), City of London (CTY) and JPMorgan Global Emerging Markets Income (JEMI).

 

Equity investment trusts with a yield over 4%

TrustYield at 07.04.17 (%) Yield at 9.08.16 (%)Market Cap (£m)Discount/ premium (%)Share price total return 1 yr (%)*
European Assets6.57.4393-216.02
Henderson Far East Income5.65.9420+1.237.89
BlackRock Commodities 5.28.291-736.98
Merchants5.25.7507-523.47
Henderson High Income4.8na213+2.428.16
Dunedin Income Growth 4.64.8379-1024.6
F&C UK High Income4.6na91-620.31
Value and Income4.54.3114-1914.92
Murray Income 4.34.4507-1023.74
Aberdeen Asian Income 4.14.4393-839.13
Murray International 44.41,534-140.59

Source: Stifel, list includes trusts with market caps in excess of £80m.

*FE Analytics, as at 10.04.17