Seven trusts with a dividend yield above 4%

It’s now 18 months since interest rates started rising in the UK. Having been at ‘emergency’ levels for a full 12 years, the Bank of England started raising rates in February 2022 – from 0.5% to 5.25% today.

While that’s been bad news for people on variable mortgages, it has been good news for cash savers. Or has it?

More than £500bn in accounts offering less than 1% interest

Believe it or not, an estimated £250bn is still languishing in cash accounts paying zero percent in interest, while £260bn sits in easy access savings offering 1% or less*.

And while banks such as HSBC are announcing huge profits – profits that have doubled this year thanks to interest rates rising around the world  – it’s clear that the speed with which the rises have been passed on to savers has been slow to at a stand-still.

Such is the differential that banking bosses have been hauled in front of committees to defend the paltry rates. The Financial Conduct Authority (FCA) has also set out a 14-point action plan to ensure banks and building societies are passing on interest rate rises to savers appropriately.

The FCA said it would expect a higher pass through and noted that the speed of pass through is slower for savings than mortgages. “The big nine firms have been increasing their mortgage Standard Variable Rates (SVRs) broadly in line with the timing of base rate rises, whereas there has been a significant delay in the speed they have done so for savings rates,” it stated.

How to achieve a higher income

Some savvy savers will have been able to lock in better rates, but the fact remains that with inflation still coming in at over 7%, the real value of cash savings for all continues to fall.

So what’s the answer? While equities are a riskier option, the dividends available are at a similar level to the highest cash savings rates and, while not guaranteed, there is the potential for capital returns, particularly for longer-term investors.

Here we highlight seven investment trusts with dividend yields above 4%  – and remember, investment trusts also benefit from having a revenue reserve where they can store excess dividends in the good times to ensure dividend stability in the bad times.

Seven investment trusts with dividends of 4%+

1. BlackRock World Mining Trust: dividend yield 6.6%**

BlackRock World Mining Trust is a specialist trust offering exposure to mining and metals companies globally. In addition to investing in quoted securities, the trust may also invest in royalties derived from the production of metals and minerals, physical metals, and unquoted securities.

2. TR Property Investment Trust: dividend yield: 5.8%**

TR Property Investment Trust invests in the shares of property companies of all sizes, typically within Europe and the UK. It will also have a small amount invested in physical property in the UK. Its managers look for well-run businesses in sectors including retail, office, residential, industrial property, and alternatives (which includes student accommodation, self-storage, and healthcare).

3. JPMorgan China Growth & Income: dividend yield 5.2%**

JPMorgan China Growth & Income invests in ’Greater China’ companies which are quoted on the stock exchanges of Hong Kong, China, and Taiwan, including A-Shares listed in Shenzhen and Shanghai or which derive a substantial part of their revenues or profits from these territories. The managers are growth-oriented investors who target higher quality companies which also pay an income.

4. The City of London Investment Trust: dividend yield 5.1%**

Launched in 1891, The City of London Investment Trust is one of the longest-running investment trusts in the UK. It aims to provide growth in income and capital by investing predominantly in larger UK companies with international exposure. It has increased its dividend payment every year for the past 56 years.

5. Schroder Income Growth: dividend yield 4.7%**

Schroder Income Growth’s principal aim is to provide real growth of income in excess of the rate of inflation. It invests mainly in the shares of UK larger and medium sized companies although it can also invest some of the portfolio in the shares of firms listed abroad.

6. Schroder Oriental Income: dividend yield 4.7%**

Schroder Oriental Income aims to provide income and capital growth by investing in Asia Pacific companies (including Australia and New Zealand) that offer attractive yields and growing dividend payments.

7. Murray Income Trust: dividend yield 4.3%**

Murray Income Trust aims to provide a high and growing income combined with capital growth by investing in a portfolio of 30-70 UK companies. The trust is conservatively managed and targets resilient companies which can thrive in any economic scenario. The trust announced its 50th consecutive year of dividend growth this week.

*Source: youmoney.com, 31 July 2023

**Source: Stifel, 19 July 2023

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