LON:FSFL | Income Investing - For Retirement

31st Mar '22 by Dicky Mint

27 comments 4606 reads

Update: Thanks everyone who has engaged in any way with this - reading or contributing. I've added all the securities mentioned to the list down the side there ----> it's certainly given me some new ideas to explore. Please continue to comment if you so wish and I will add any new stocks to the list as we go.

Cheers :) Dicky

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I'm very interested in fellow members views on building an income portfolio

With my wife retiring shortly (at 55 - lucky lady) I have started to transition her ISA investments into an income portfolio. So far I have purchased 4 investments for income purposes

City Of London Investment Trust (LON:CTY) - 30%

Merchants Trust (LON:MRCH) - 25%

Henderson High Income Trust (LON:HHI) - 25%

Murray International Trust (LON:MYI) - 10%

At cost (including fees) I will achieve a 5.11% yield based on historic dividend payouts. Which feels like a decent result ... notwithstanding the current rate of inflation.

If you were doing the same, or could offer an opinion, what would you suggest I could add to this portfolio? I am not seeing your comments as a recommendation - I will do my own research so please do reply as I suspect others would also benefit.

Cheers

Dicky

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PLS1nve5t

31st Mar '22

Three others that may be suitable :-

European Assets Trust (LON:EAT)

Divdend of 5.97%, discount to NAV 5%

Chelverton Uk Dividend Trust (LON:SDV)

Divdend of 5.19%, discount to NAV 4.29%

Henderson Far East Income (LON:HFEL)

Divdend of 7.91%, though the premium to NAV 2.16%

Brilliant Leader

The first three holdings probably carry a lot of duplication (I haven’t checked recently) in relation to their underlying holdings. You might want to consider Henderson International Income Trust (LON:HINT) for example to give additional international exposure. And in this inflationary environment you might also want to consider holding some real assets such as property trusts and infrastructure trusts where there are plenty of 5-7% yields on offer and generally rising NAVs. Hope that helps!

Dicky Mint

Henderson International Income Trust (LON:HINT) already on the 'watchlist' :) Prefer higher yield if I can but as you say it would provide additional international exposure.

Would you suggest any particular property and infrastructure trusts?

I do own a number of residential properties yielding decent rents so my exposure there is more direct than through a specific trust but I'm definitely open to looking at them.

andrewdb

I would be cautious with Regional Reit (LON:RGL)

Its assets look to be offices outside the M25.

Over the last 2 years, my employer has not renewed any leases - the footprint has dropped by over 30%. It is likely we will move from a number of big offices (bristol) to 1 office and a meeting center eventually. No comment on the wisdom of this but the beancounters like not having to rent space / provide desks / pay for printers / paper / coffee / aircon / cleaners...

To be fair, this trend started in London some years ago, a lot of the offices in the city are actually conference suites. There seems to be a general acceleration of this movement.

I will share a couple of ideas but it is well worth using the AIC website to search by sectors and other filters, e.g. dividend yield.
https://www.theaic.co.uk/

Property - Aew Uk Reit (LON:AEWU) (I hold) Impact Healthcare Reit (LON:IHR) (I hold) Schroder European Real Estate Investment Trust (LON:SERE) (I don’t hold)

Infrastructure - Renewables Infrastructure (LON:TRIG) (I don’t hold) Foresight Solar Fund (LON:FSFL) (I hold) Hicl Infrastructure (LON:HICL) (I don’t hold)

KevinS1

Hi Dicky,

I too am thinking long and hard about my PF in respect of stepping back. Part of me feels I'd rather stick with growth stocks and take an income from the overall PF whilst other parts like the idea of less ups & downs and steady income.

To date I have invested in a few trusts that provide some income and have also maintained a few shares that offer a decent income whilst offering potential growth. I'll use some of the ideas here to do some further research.

I haven't landed on the best answer yet. Current holdings include;

Temple Bar Investment Trust (LON:TMPL) Blackrock Energy And Resources Income Trust (LON:BERI) Blackrock Energy And Resources Income Trust (LON:BERI) Tritax Eurobox (LON:EBOX) Anglo Pacific (LON:APF) Headlam (LON:HEAD) Smiths News (LON:SNWS) Supreme (LON:SUP) £SOM

And then some of the usual FTSE100/250 dividend players that may have some growth opportunities amongst them; £BT Legal & General (LON:LGEN) £LLOY

Hope these help.

The Phoenix

Hi from memory thats Edmund Shing's book I'm moving more towards investment trusts from single stocks does the book cover off things like what investments to avoid in the current inflationary environment and what to be invested into and equally what to be in when inflation and interest rates start to fall ?

It doesnt. It is a very good book in that it does convey the authors view that you can do quite well investing (beat a simple index) using a couple of simple rules very well - I think he is right.

Robert Tack

1st Apr '22

I hold all of these trusts (I am mainly invested in ITs) but mainly as a means of income amongst the majority for which I prefer to see long term share price gains, which most of these do not (except SCIN). One of my main rules of thumb is to look at the long term share price movement : 10 years and 20 years, which the Stockopedia charting allows. I find that high dividend paying IT share prices show long term volatility (see MYI and MRCH) which allows switching to capital appreciating ITs at their peaks; if this is done, then the total returns may be almost as good as ITs such as BUT and THRG; for instance CLIG I have held for a long time becasue of this.

Regards

pka

2nd Apr '22

You might get some useful ideas on building an income portfolio from a poster called mickeypops on the lemonfool website, who set up what he says is a real life income portfolio using ITs in July 2018. You can find his latest annual review of his portfolio's performance by doing a Google search for "investment trust income portfolio year 3 review".

thanks I’ll take a look

JohnEustace

3rd Apr '22

I've run a screen in SharePad looking for investment trusts with:

Dividend per share growth for 10 years adjusted for splits and consolidations.

Min yield of 3%

Trading at or below NAV

Morningstar rating of 4 or 5 stars

I get 3 results, Murray Income Trust (LON:MUT) Schroder Oriental Income Fund (LON:SOI) Tr Property Investment Trust (LON:TRY)

There may be a bit of diversification there beyond the usual suspects all holding Shell, Unilever, Vodafone, GSK etc.

doctor dave

4th Apr '22

I’m quite surprised to see so many investors choosing a basket of investment trusts. Given the additional fees involved and the numerous stocks held in each, isn’t this almost guaranteed to give you a rather “average” return?

5th Apr '22

Hi djrhs, the AIC website (which is a brilliant resource) explains the pros & cons of Investment Trusts vs other forms of investment. Whilst not right for everyone I, know for myself that they offer me some great opportunities and I have moved completely out of UT's over the last few years and am currently flexing more away from single-company-shares and into Inv Trusts as I get older and want to de-risk my PF some more whilst still keeping exposure to certain asset classes and regions.

I also find keeping on the look-out for short term variations in discounts/premiums also allows some great entry points.

Ive cut & pasted the AIC comments below - there is more than this, but it sums up some of the pros.

epo001

8th Apr '22

There is a lot to be said for boring, average, consistent and (within limits) predictable. Most PIs vastly overrate their stock picking skills. Saying you can outperform ITs is one thing actually doing it, consistently, quite another.

I have some of these, along with a basket of dividend paying stocks.

Lucky dip

9th Feb '23

YES, particularly when AEWU charges 4.7% fees annually.

Tony Drew

24th Feb '23

I have two ISAs, one is all ITs and the other mainly UK stocks. Both portfolios try to cover most sectors but ITs are more weighted to overseas and growth. They both started about 20 years ago with roughly the same capital. At the end of the last bull phase the IT portfolio was about 20% ahead of the UK ISA. Sadly over the last year the IT fund has declined and the two funds are level pegging . I await the recovery which I am sure will favour growth ITs. Fortunately, my pensions cover all my outgoings as I approach my 90th birthday!

Rusty2

You could consider commodity stocks such as Rio Tinto (LON:RIO) and Glencore (LON:GLEN), these are beginning to look interesting, high dividends and share price are pulling back.

Alphaflight

The Volkswagen Group Preference shares are paying around 20% per annum right now. Stock ticker: VOW3

I'm not a big fan of car related companies when a global rescission is coming but they do own brands that will probably keep their heads above water e.g. Volkswagen, Volkswagen Commercial Vehicles, ŠKODA, SEAT, CUPRA, Audi, Lamborghini, Bentley, Porsche and Ducati.

GrahamScott

I could be wrong but I think that was a special dividend. It’s normally around 5 euros so around 4-5%.

My high dividend (safe) stocks are General Accident (LON:GACA) , Aviva (LON:AV.B) , Lloyds Banking (LON:LLPC) and Northern Electric (LON:NTEA) all paying above 6.5% at todays prices.

Income investing - for retirement

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Dicky Mint

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