Just a thought

[G3lc]

Of the top ten holdings in MRCH only 4 pay more in dividends than the Trust itself pays its investors, while in CTY it is only 2, while I appreciate they have other ways of creating income, and have a long record of increasing dividend payments, one could perhaps ask, will the music stop?

[kempiejon]

Of the top ten holdings in MRCH only 4 pay more in dividends than the Trust itself pays its investors, while in CTY it is only 2, while I appreciate they have other ways of creating income, and have a long record of increasing dividend payments, one could perhaps ask, will the music stop?

Perhaps not but it could probably slow down. Still high yielding but actual income growth I think has tapered off. I guess those sorts of ITs will only be able to maintain an increase from reserves for a measurable time if the underlying constituents don't start increasing. Of course if one holding was a large %age and had a high yield it could carry the trust but those 2 aren't built like that. Is it 15% of income that can be held back in good years to cover leaner periods? How many years were City of London Investment Trust and Merchants Trust able to salt money away and how much is left?

Merchants Dividend cover (revenue reserves) (years) of 0.64 years.
dividend 1.8% compounded 5 year annualised dividend growth.
https://www.theaic.co.uk/companydata/me ... /dividends

City did better at dividend growth 2.58% pa have 0.44 years of reserve
https://www.theaic.co.uk/companydata/ci ... /dividends

[Jam2Day]

I was interested to hear that Bruce Stout (Murray International) considered the UK to be a possible dividend trap. As things stand, I am inclined to agree which does pose a few questions for income funds which focus largely on the UK. However, I believe there is a silver lining in that a dividend culture in certain overseas markets (notably Japan & emerging) is becoming more popular, not least because it will attract capital inflows which is especially relevant to China where they have been seeing considerable capital outflows. Whether that dividend is genuinely sustainable through growth and profitability or merely a tail chewing bung is that old perennial chestnut .