Page 44 - DIY Investor Magazine | Issue 41

DIVIDEND ROYALTY: FOUR INVESTMENT TRUSTS FOR DIVIDEND SEEKERS
· August 2024 44
DIY Investor Magazine
OVER THE PAST COUPLE OF YEARS,
THE COST-OF-LIVING CRISIS HAS BEEN
A PAINFUL REALITY FOR MANY, IMPACTING EVERYTHING FROM RENT AND MORTGAGES TO GROCERIES. THIS UNDERSCORES
THE IMPORTANCE OF MAKING YOUR MONEY WORK HARDER FOR YOU – BY DAVID JOHNSON
One strategy is to focus on trusts that generate high total returns. However, achieving this consistently is often easier said than done.
‘THESE INVESTMENTS
A more reliable approach
CAN OFFER CAPITAL
to mitigating the impact GROWTH AND
of inflation might be to DIVIDEND YIELDS
invest in dependable
THAT COMFORTABLY
dividend-paying trusts. OUTPACE INFLATION’
While top dividend payers might not exhibit the explosive growth of technology funds, they can provide steady cash flow. If chosen wisely, these investments can offer capital growth and dividend yields that comfortably outpace inflation.
FOUR PICKS WITH A TRACK RECORD OF RELIABLE DIVIDENDS
We have employed a combination of quantitative analysis and qualitative judgment to identify four investment trusts that stand out for their attractive dividend profiles and reliability. Here’s our selection criteria:
• Yields exceeding benchmarks and UK inflation: we sought trusts with yields surpassing their closest benchmarks and current UK inflation rates.
• Dividend growth: trusts that have grown, and not cut, their dividends over at least five years were prioritised.
• Positive NAV growth: we focused on trusts showing positive net asset value (NAV) growth over five years.
• Supportive discount profile and share price return: trusts with a supportive discount profile and share price returns were also favoured.
Our chosen investment trusts not only represent an optimal blend of these factors but also hopefully offer a range of
strategies to fit diverse portfolio needs. By considering these trusts, investors can find options that best align with their financial goals and help offset the pressures of inflation.
CQS NEW CITY HIGH YIELD
CQS New City High Yield (NCYF) aims to combine high dividend yields with capital growth and preservation. Managed by Ian Francis, NCYF takes a conservative ‘ONE OF THE PEER approach to capital growth.
GROUP’S BEST The portfolio predominantly
PERFORMING consists of high-yielding
FUNDS OVER THE fixed-income securities from
LONG TERM’ corporate and government
issuers, with a small stake in high-yielding equities. NCYF consistently ranks among the highest-yielding funds in its debt and loans peer group and is one of the peer group’s bestperforming funds over the long term.
These characteristics don’t come cheap, however, as its shares have traded on a premium to net asset value (NAV) for much of the last five years (currently 6.1%). NCYF’s managers are keen to see the fund grow, but in a measured way. Considerable care is taken not to dilute its revenue,
so that it can continue to cover its dividend.
Part of NCYF’s success has come as a result of Ian taking advantage of interest rate rises to lock in high yielding bonds, getting in early before any potential interest rate falls. NCYF’s portfolio currently has a strong exposure to the UK, as Ian feels the economy is looking a lot healthier and the political outlook is improving.