Broadening your horizons in the hunt for income
Investment trusts enable you to address a whole world of different dividend opportunities
An investor on the hunt for dividends does not have to limit their search to the UK. The latest global dividend index from asset manager Janus Henderson shows global dividends surged 12.9% in the second quarter of 2018 reaching a record $497.4bn.
Dividends hit new record levels in 12 countries, including France, Japan and the US, which are among the largest contributors to the index. The index itself closed the quarter at a fresh high of 182, meaning global dividends have risen by more than 80% since 2009.
LOOK TO NEW GEOGRAPHIES
Investment trusts are a simple way of accessing the income which is pouring in from around the world. Examples of trusts with a focus on global dividends include JPMorgan Global Growth & Income (JPGI) and Henderson International Income (HINT).
The latter has been steered by Ben Lofthouse since its launch in 2011. It targets a similar yield to UK equity income trusts but excludes the UK from its portfolio entirely.
The approach is to remain genuinely diversified so that not one of its three regional portfolios, in North America, Europe and the Far East, accounts for more than 50% of its holdings.
Lofthouse is on the hunt for value opportunities – looking to buy unloved stocks which can deliver capital growth and rising dividends. Current holdings include Coca-Cola and Deutsche Telekom. The shares currently trade at a 0.7% discount to net asset value (NAV) and the ongoing charge is 0.9%.
The JPMorgan trust is managed by Jeroen Huysinga and Timothy Woodhouse. Interestingly, they invest in a portfolio of global stocks which provide the best total returns rather than those paying the biggest dividends. Total return refers to losses or gains from shares proce change plus dividends.
By using profits booked on investments alongside the underlying yield from these companies, Huysinga can generate a healthy dividend yield for investors in the region of 3.8%. Top holdings include Googleowner Alphabet, software firm Microsoft, insurer Prudential (PRU) and payments business Visa.
The fund trades at a modest 1% premium to NAV and has an ongoing charge of 0.57%, rising to 1.23% with performance fees (charged if it hits certain performance targets).
BROADEN YOUR ASSET HORIZONS
As well as looking to different
RECORD GLOBAL DIVIDENDS IN Q2 OF $497.4BN
geographies for income, you could consider using investment trusts to gain access to a variety of different asset classes such as infrastructure.
The recent recommended £1.45bn takeover bid for John
Laing Infrastructure (JLIF) by a private equity consortium has helped lift other infrastructure trusts such as HICL Infrastructure
(HICL) and BBGI (BBGI) and led to speculation of further M&A in the space.
These trusts had been languishing at discounts to NAV thanks to the perceived risk of a crackdown on private involvement in big public projects.
However, the John Laing bid demonstrates the appeal of the highly visible cash flows associated with infrastructure projects, which are often linked to, and therefore protected from, inflation.
Another alternative asset class linked to infrastructure and which can often generate a healthy income is renewable energy.
The collection of investment trusts in this area principally invests in wind farm and solar projects. Specific examples include The Renewables Infrastructure Group (TRIG)
which has a bias towards projects which are already in operation in the UK and northern Europe. It generates a yield from this portfolio in the region of 5.9%. Foresight Solar (FSFL), which focuses on ground-based solar assets, predominately in the UK, also offers a prospective yield of 5.9%. The investment trust has nearly 40 assets in the UK and a handful in Australia. It raised £48m in an over-subscribed share placing this summer to invest in new projects. (TS)
SOME TRUSTS OFFER DIVIDEND YIELD APPROACHING 6%