On the income trail
Hunt for dividends on the AIC website
As Compass readers will know, investment trusts can work wonders for income seekers. Thanks to their ability to retain up to 15% of their income each year, they can build reserves in good years to support dividends in tougher times. This smoothing effect has allowed many trusts including our dividend heroes to maintain or even increase their dividends for decades – through wars, recessions, and a certain global pandemic you may remember.
It’s not a bad time to be hunting for income. Though yields in core income sectors such as UK Equity Income have slightly moderated since interest rates have started to come down, they’re still appealing. The average investment trust yields 3.3%, with the UK Equity Income sector offering 4.2%, Global Equity Income 3.9%, Debt – Loans & Bonds 8.0% and Renewable Energy Infrastructure as high as 9.9%.
But with all this choice, how do you go about selecting an investment trust – or trusts – for income? That's where Income Finder comes in.
This free tool on the AIC website is designed to help income investors map out a smoother income profile across the year, by showing you when each of your chosen trusts typically pays dividends.
…how do you go about selecting an investment trust – or trusts – for income? That's where Income Finder comes in.
First of all, log in to your account on the AIC website. (What do you mean, you don’t have one? It’s free – go and create one now!)
Once you’re logged in, you can build your own income portfolio by selecting the trusts you hold (or are thinking of investing in) and Income Finder will show you their dividend payment history, displaying the value of past distributions based on the number or value of shares you specify. That can be a helpful way of visualising what you might receive over a year – though of course, dividends are never guaranteed and please remember you are looking into the rear view mirror.
Income Finder can also help identify gaps. If your holdings tend to pay dividends in March, June, and December, for instance, you might want to consider whether another investment could help cover the summer lull.
Whether you're drawing income in retirement or simply looking for a way to smooth out the income you receive over a year, using tools like Income Finder can help you build a more predictable income stream.
Our email alerts feature could also help. You can set this up so you’re notified when new dividends are announced by the companies that matter to you. That means no more hunting through stock exchange announcements; just a timely reminder in your inbox that could help you plan.
It's also worth remembering the limitations of other popular income vehicles, such as open-ended funds and ETFs. These funds are required to distribute all income as it's received so they cannot smooth dividends in the same way that investment trusts can. This means payments can vary significantly from one period to the next, depending on the performance and payment cycles of the underlying holdings. That might work well in strong years, but it can leave income investors exposed when the environment is less favourable.
Whether you're drawing income in retirement or simply looking for a way to smooth out the income you receive over a year, using tools like Income Finder can help you build a more predictable income stream. Let us know how you get on – we love feedback!
