Investment trust sectors providing the highest dividend yields

With interest rates still paltry and equities pricier than ever, here are the in

Investment trusts specialising in leasing on average provide the highest yields for investors, according to new research by the Association of Investment Companies (AIC).

The trade body has carried out research to show the 13 investment trust sectors that provide an average yield of over 3 per cent. 

Trusts in the leasing sector topped the table, providing an average yearly divided yield of 6.9 per cent. Closely followed were debt specialists, providing an average yield of 6.5 per cent.

Other investment sectors also included those focusing on equity and bond income, global equity income, UK equity income and provide equity, all yielding an average of over 3 per cent. 

However, warns Annabel Brodie Smith, communications director of the AIC, ‘Investors should not buy on the basis of the headline yield alone. There’s a broad spectrum of risk and reward, so it’s crucial that investors do their homework.’

Investors should look at the gearing (borrowing) of each trust, as high gearing, while leading to greater returns, can amplify losses should the trust in question run in trouble. 

30/09/2017

AIC sector

Discount / Premium (%)

Dividend yield (%)

Sector Specialist:
Leasing

21.1

6.9

Sector Specialist:
Debt

-0.3

6.5

Sector Specialist:
Infrastructure - Renewable Energy

9.8

5.7

UK Equity &
Bond Income

-8.4

5.2

Sector Specialist:
Infrastructure

11.5

4.8

Property Specialist

7.8

4.8

Property Direct -
UK

5.4

4.6

Private Equity
(excl. 3i)

-15.1

4.2*

Hedge Funds

-12.5

4.2

Property Direct -
Europe

-5.5

3.9

Sector Specialist:
Commodities & Natural Resources

-14.6

3.7

Global Equity
Income

2.3

3.7

UK Equity Income

-4.4

3.6
Source: AIC using Morningstar,* Weighted average includes 9% distribution from
Electra Private Equity. Private Equity sector (excl. 3i) average dividend yield
at 17 October 2017 is 3.1%.

Also, while some of the dividend yields are particularly high, investors should take note of whether a trust is trading on a discount or premium.

While trusts specialising in leasing have a whopping 6.9 per cent yield, for example, on average they are trading on a premium of 21.1 per cent. That means that shares in such trusts on average are trading for much more than their net asset value, leaving investors highly susceptible to a decline in price. Similarly all the trusts in the specialist infrastructure sector are on substantial premiums, with an average of 11.5 per cent. 

Among infrastructure specialists, GCP Infrastructure Investments offers a generous yield of 6 per cent (higher than the sector average of 4.8 per cent highlighted by the AIC’s research). However, its premium is comparatively high at 14.15 per cent, compared to industry average of 11.5 per cent. 

When it comes to debt specialists, Money Observer Rated Fund TwentyFour Select Monthly Income IT is trading on a not-too-high premium of 3.35 per cent as well as providing an above industry average yield of 6.6 per cent.

-Top 10 most popular investment trusts – September 2017

For more information about specific investment trusts (as well as funds), see our Money Observer Rated Funds for 2017.

Keep up to date with all the latest personal finance news and investment tips by signing up to our newsletter. Email subscribers will also receive a free print copy of Money Observer magazine.


Subscribe to Money Observer magazine

 

Comments

Post new comment

The content of this field is kept private and will not be shown publicly.
By submitting this form, you accept the Mollom privacy policy.