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Alternative investment trusts for the dividend drought

Equity dividends are being slashed but alternative assets are still generating income
Alternative investment trusts for the dividend drought

Some 45 per cent of UK companies had scrapped their dividends by 5 April and the situation is likely to deteriorate. Financial services provider Link Group predicts that in the worst-case scenario UK dividend payments could fall by 51 per cent over the course of 2020. However, investors who rely on their investments for income may still be able to get it from equity income trusts, as we explained in the Big Theme of 3 April, a number of which should be able to maintain dividends for the time being by drawing on their revenue reserves.

But equity trusts are not the only source of income – many investment trusts focused on alternative asset classes such as property, leasing and infrastructure also offer chunky yields. So if you are looking to diversify your income sources you could consider these. But before you invest in trusts focused on these kinds of assets due diligence is vitally important. Not all of them have such hefty revenue reserves as some equity income trusts, and some of these assets have been particularly hard hit by the coronavirus lockdown.

As of 14 April, 16 investment trusts have suspended, reduced or deferred their dividend payments, and all but one invest in alternative assets.

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