- Investment companies show income credentials
- Miners still score well for dividends
In the depths of the pandemic when many companies were slashing dividends to shareholders, investment companies were notable for protecting their payouts. That is controversial because that means paying dividends out of capital. This aspect of so-called reserve management has the opportunity cost of diminishing the powder stores investment companies have to top up holdings and it means missing out on compounding total returns over the longer term.
Still, for many investors who rely on income from shares, investment companies’ commitment to returning cash has been a boon. Also, a counter argument to cutting dividends, is that had investment companies gone down this route their share prices would have fallen by more - potentially widening the discount to net asset value (NAV) to an uncomfortable level for managers and shareholders.