Re­place your salary with as­sets that pay a monthly in­come

As savers spring-clean port­fo­lios for 2018 many seek hold­ings that, like a salary, pay in­come each month. By Richard Dyson

The Sunday Telegraph - Money & Business - - Front page -

If an investor’s pri­mary aim is to re­ceive a high in­come, the next re­quire­ments are that the in­come is reg­u­lar and re­li­able. The start of a new year brings the usual flurry of re­quests for de­tails of the best avail­able in­vest­ments that pay in­come monthly. It’s a com­mon re­quest, yet the in­for­ma­tion isn’t read­ily avail­able in best-buy ta­bles ei­ther in print or on­line.

So Tele­graph Money has done the work for you in this up-to­date guide, which cov­ers the best monthly-pay­ing in­vest­ments

– from zero-risk cash ac­counts to funds that in­vest in com­pany shares and bonds.

Monthly-pay­ing cash ac­counts, in­clud­ing Na­tional Sav­ings

The price you pay for monthly in­come is a lower rate than you might ob­tain from stan­dard ac­counts. Providers say that’s be­cause fre­quent pay­ments are more costly to process. The usual vari­able-rate and fixed-rate op­tions are avail­able.

The best vari­able-rate sav­ings ac­counts pay­ing monthly in­come re­quire no­tice of three to four months. Mile­stone Sav­ings pays 1.51pc per year (three months’ no­tice) and Paragon Bank 1.44pc (four months’ no­tice). For no-no­tice monthly pay­ers, the best providers are RCI Bank and Post Of­fice Money. Both of­fer ac­counts pay­ing 1.29pc.

Most ac­counts re­quire min­i­mum de­posits, typ­i­cally £1,000.

Fixed-term ac­counts with monthly dis­tri­bu­tions are more at­trac­tive. An 18-month ac­count from Char­ter Sav­ings Bank pays 1.85pc a year on £10,000, for ex­am­ple.

The best one-year bonds pay 1.75pc (from Char­ter Sav­ings again) and 1.7pc (Paragon Bank).

For a rea­son­able re­turn, monthly pay­ments and ab­so­lute se­cu­rity the best bet is Na­tional Sav­ings & In­vest­ments’ Guar­an­teed In­come Bonds Is­sue 56. The an­nual rate is 2.15pc, un­usu­ally com­pet­i­tive for NS&I. At the mo­ment only one in­sti­tu­tion of­fers sim­i­lar terms and a bet­ter rate: that’s Char­ter Sav­ings, which pays 2.19pc. NS&I has the edge in terms of se­cu­rity: de­posits there are backed by HM Trea­sury.

Higher monthly in­come from shares and bonds

You can push your in­come up to 4pc or more per year and still re­ceive the in­come monthly, pro­vided that you’re pre­pared to ex­pose your cap­i­tal to some risk.

A num­ber of unit trusts and in­vest­ment trusts make monthly dis­tri­bu­tions, and sev­eral make for highly at­trac­tive long-term hold­ings, ir­re­spec­tive of the fre­quency of their div­i­dends.

In­vest­ment trusts dif­fer from unit trusts (or “open-ended” funds) in that they are set up as com­pa­nies with shares listed on the stock mar­ket. This gives sev­eral ad­van­tages: one is that po­ten­tial in­vestors can swiftly look up re­cent div­i­dend pay­outs ex­pressed in pounds and pence and then com­pare them with the cur­rent share price. That gives a re­li­able idea of likely in­come, al­though fu­ture div­i­dends can of course be cut.

One monthly-pay­ing in­vest­ment trust tipped by the Tele­graph’s

Questor col­umn is the F&C Com­mer­cial Prop­erty Trust.

The com­pany owns £1.4bn of shops, ware­hous­ing, of­fices and other prop­er­ties around Bri­tain, on which it col­lects rents. It pays a steady 0.5p per month div­i­dend per share, and with the shares trad­ing on Fri­day at 137p, that gives an an­nual yield of 4.3pc.

F&C Com­mer­cial Prop­erty is one of half a dozen in­vest­ment trusts to pay monthly, with the oth­ers be­ing gen­er­ally smaller and ex­posed to more niche as­sets in­clud­ing spe­cial­ist prop­erty or bonds. So one an­swer, for those who wish to stick to in­vest­ment trusts, is to hold sev­eral bet­ter­known trusts that pay quar­terly div­i­dends and se­lect those hold­ings on the ba­sis that their div­i­dend pay­ments fall in dif­fer­ent months (see page 10).

Your al­ter­na­tive is to choose unit trusts. These are run by fund groups and typ­i­cally in­vest your money in bonds or shares. Unit trusts are gov­erned by dif­fer­ent rules from those that ap­ply to in­vest­ment trusts. One con­se­quence is that the pounds-and-pence in­come paid to unit hold­ers can be more

vari­able than the in­come paid by in­vest­ment trusts. Some in­vestors will find this vari­abil­ity in­con­ve­nient, but it has an­other down­side, which is that it can dis­tort the quoted yield of the fund. This is the yard­stick fig­ure in­vestors are ex­pected to use to gauge fu­ture pay­outs.

Unit trusts that pay monthly and have solid track records in­clude Pre­mier Monthly In­come, In­vesco Per­pet­ual Monthly In­come, Schroder High Yield Op­por­tu­ni­ties and Jupiter Monthly In­come.

Get monthly in­come by mar­ry­ing sev­eral in­vest­ments that pay quar­terly div­i­dends

Tele­graph Money is a fan of many in­vest­ment trusts and for monthly in­come-seek­ers we sug­gest that one op­tion is to buy shares in sev­eral whose quar­terly div­i­dend pay­ments fall in dif­fer­ent months. For in­stance, City of Lon­don in­vest­ment trust, which has an un­bro­ken record of div­i­dend in­creases that stretches back more than half a cen­tury, cur­rently yields al­most 4pc and pays out in Fe­bru­ary, May, Au­gust and Novem­ber.

Its £1.6bn port­fo­lio is in­vested in an ar­ray of large, multi­na­tional com­pa­nies listed in Lon­don, such as HSBC, Bri­tish Amer­i­can To­bacco and Shell.

A ri­val trust, which also in­vests in shares of com­pa­nies that de­rive earn­ings from all over the world, is In­vesco In­come Growth. It also yields al­most 4pc – but makes its div­i­dend dis­tri­bu­tions in the months of March, July, Oc­to­ber and De­cem­ber.

A third trust – for in­stance JP Mor­gan Global Emerg­ing Mar­kets In­come – could be held along­side the other two. Its pay­ments in Jan­uary, April, July and Oc­to­ber would then cover ten months of the year.

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