One area that concerns me regarding the IT's mentioned is the ability to maintain the dividend. From the last annual accounts:
CTY dividend has income of GBP62,463 but dividend costs GBP76,865 (Reserve GBP45,623)
ATST dividend has income of GBP36,375 but dividend costs GBP46,601 (Reserve GBP99,174)
CTY dividend has income of GBP21,372 but dividend costs GBP27,764 (Reserve GBP38,386)
As all have pretty healthy reserves this does not present any immediate problems but if I were management it would be something that would need to be addressed sooner or later. As an investor it is a concern so I am veering toward ADIG, BERI, HDIV - if only for some diversification.
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3 Dividend Hero Investment Trusts
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- Lemon Half
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Re: 3 Dividend Hero Investment Trusts
smileymiley wrote:As all have pretty healthy reserves this does not present any immediate problems but if I were management it would be something that would need to be addressed sooner or later.
Presumably what they need to monitor is whether the dividend cutters are likely to reinstate and if not whether they should be sold and replaced with dividend payers.
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- The full Lemon
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Re: 3 Dividend Hero Investment Trusts
As far as Alliance is concerned they have addressed this at some length in their recent Annual Report. As smileymiley tells us they have a current revenue reserve of £99.2 million having used £10 million from their reserves to help pay the dividend for 2020. The Annual Report also tells that they have realised capital reserves (which may be distributed) of £2.2 billion. They are also proposing to apply to the Courts to convert their current merger reserve into another distributable reserve. I think there is no danger of Alliance not continuing to increase its dividend for the foreseeable future. It is of course quite modest in any case. Alliance is not an income trust and will I am sure not be bothered very much about dividend cutters or otherwise. They buy/hold on the basis of the overall return. The income is only a small part of that.
City of London is I think the most vulnerable one, and in fact the poorest overall performer.
Dod
City of London is I think the most vulnerable one, and in fact the poorest overall performer.
Dod
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- Lemon Slice
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Re: 3 Dividend Hero Investment Trusts
I have held CTY in the high yield part of my portfolio for a few years, when it got hit hard by last year's turmoil I bought some more at the bottom and so dodged a loss and am now slightly up while having extracted all income. I do though share many of the misgivings mentioned here about them and am thinking of moving those funds elsewhere. I do not like their big holding in BAT but I want to find something in the same yield ballpark and also with a decent amount in the UK as I feel that there is growth to come here. I guess MUT and Merchants are candidate, although MRCH are also heavily into tobacco which I think is unwise.
MM
MM
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Re: 3 Dividend Hero Investment Trusts
We should be careful of chasing our tails on this one - or else get used to chopping and changing as time goes on.
As regards ATST it was long regarded as a dog - always at huge discount to the despair of posters on the boards. Those who did not chop and change did OK in the end as the discount narrowed.
CTY, on the other hand was, during that time, the benchmark of a solid income fund and at a premium (as it still is). It suffered badly during the Brexit years around 2016 and you can see this clearly in the chart - it's clear when you compare CTY with ATST over ten years that the latter handled Brexit better. But could we have anticipated that? Incidentally, my HYP suffered in generally the same way.
One must also note they are not the same animal: CTY is an out and out fund for those wanting income and it's price has suffered badly before when its payout has been cut or shaved. ATST is only yielding 1.5% so it would be surprising indeed if it could not keep this up - it should be a piece of cake but not much use if one needs income: you'd be starving. Horses for courses.
What I'm saying is in essence, don't think there are easy conclusions to be drawn. Markets and the fortunes of ITs morph all the time so don't rush to judgement. I think the choice for the individual is either to be fast on one's feet and monitor performance and change frequently: or just sit back for long periods and employ masterful inactivity.
As I've often written: whatever one invests in, someone can always point to another investment with go-faster stripes.
Arb.
As regards ATST it was long regarded as a dog - always at huge discount to the despair of posters on the boards. Those who did not chop and change did OK in the end as the discount narrowed.
CTY, on the other hand was, during that time, the benchmark of a solid income fund and at a premium (as it still is). It suffered badly during the Brexit years around 2016 and you can see this clearly in the chart - it's clear when you compare CTY with ATST over ten years that the latter handled Brexit better. But could we have anticipated that? Incidentally, my HYP suffered in generally the same way.
One must also note they are not the same animal: CTY is an out and out fund for those wanting income and it's price has suffered badly before when its payout has been cut or shaved. ATST is only yielding 1.5% so it would be surprising indeed if it could not keep this up - it should be a piece of cake but not much use if one needs income: you'd be starving. Horses for courses.
What I'm saying is in essence, don't think there are easy conclusions to be drawn. Markets and the fortunes of ITs morph all the time so don't rush to judgement. I think the choice for the individual is either to be fast on one's feet and monitor performance and change frequently: or just sit back for long periods and employ masterful inactivity.
As I've often written: whatever one invests in, someone can always point to another investment with go-faster stripes.
Arb.
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