11 investment trusts with a dividend yield of over 4 per cent

investment-trust-income

As markets and share prices have risen, the number of trusts primarily investing in equities that have a yield of at least 4 per cent has fallen from 14 last August to 11 currently, according to new research by stockbroker Stifel. 

Share prices and yields have an inverse relationship, so a high investment yield is usually a sign that a stock is out of favour for some reason. For those investors prepared to take equity risk, these investment trusts may be attractive in the current low interest rate environment. 

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Some of these trusts currently trade on a discount, according to Stifel. For example, Dunedin Income Growth has a historical yield of 4.6 per cent and is on a 10 per cent discount to NAV (well below its one-year high of -7.2 per cent). Murray Income is also on a 10 per cent discount (one-year high -6.5 per cent), with a 4.3 per cent yield. 

Merchants has a yield of 5.2 per cent, with the shares on a 5 per cent discount (against a one-year high of -2.2 per cent. The portfolio focus is on FTSE 100 companies and the trust typically has c.20-25 per cent leverage. 

Investment trusts are generally an attractive route to income for investors, as – unlike open-ended funds, which have to pay out all the dividends they receive from the companies they invest in – they can build up meaningful revenue reserves of up to 15 per cent that can be useful in leaner years when there are dividend cuts from underlying holdings. 

- Discover how to put together an investment trust portfolio that will pay £10,000 a year income


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