How to enhance investor income if a second covid wave hits
By Cristian Angeloni, 13 Aug 20
In the current circumstances, clients ‘must be feeling like there is nowhere to turn’
Bradshaw believes investment trusts could provide an alternative given the dividend drought.
“The collapse in dividends has been painful for equity income funds as they look at how they can fill the gap left by companies suspending or cutting their pay–outs.
“However, for investment trusts the situation is slightly different. Their fund structure allows them to use revenue reserves to support dividends if there is a shortfall of income.
“This is a helpful feature in leaner years and should mean their dividends are more resilient than their open-ended peers.”
She gave the example of City of London – current yield 5.9%.
“This trust, which invests in UK shares, is somewhat of a dividend hero for investors, particularly given the current circumstances.
“Despite all the headlines of dividend cuts and suspensions, City of London just raised its dividend for the 54th year on the trot and is aiming for the same next year too.
“This is an example of where the investment trust fund structure benefits an end investor, allowing it to use revenue reserves to grow its income over the long-term.”
