Have you considered Preference Shares?

Ark_Welder

Missed one. Another reason to continue to hold - from the perspective of an income investor - is that the higher income being generated now allows a greater allocation to lower-yielding assets such as ordinary shares and cash (and cash can include ILSCs).

There should be a greater choice of companies in the lower-yielding range (e.g. 3% to 4.5%), plus, one would hope that the dividends would grow at a faster rate than for higher-yielding shares - and it is the rate of growth that needs to beat inflation. This does require that the investor can accept that the real return from the fixed interest will diminish, but that it will be replaced by the growing income from the equities. And if the rate of increase from the equities has been, and continues to be, at a rate faster than the inflation rate then the investor should be in a better income position going forward than they would be by holding higher-yielding equities for the whole of the time.

HY equities are more likely to have lower income-growth prospects and/or be more prone to cuts in the dividend: if the prospects for these companies was rosy then the yield on them would not be so high. None of which excludes the possibility of something simply being mispriced through fear or expectations.

None of this, though, would necessarily make sense for those interested purely in growth or total return. Not necessarily a reason for an income investor to buy now, either.

Masomnia

Had LLPC for almost a year now, v happy, about to get my 3rd dividend in a few weeks time. Reinvesting and it's compounding nicely.

yoghurt

Hi Just came across this thread as I am a newbie researching preference shares as the returns they offer appear to be good. I am considering the Aviva Pref 8.75 or 8 3/8 shares and would appreciate peoples views on such an investment.
Many thanks

Reaper

As mentioned in an earlier post I hold GACA (General Accident who are now owned by Aviva), though I bought them when they were cheaper than now.

I have been very happy with my prefs. However with prefs that have no end date be sure you understand the downside before investing. The Bank of England has been suggesting interest rate rises are on the horizon. If they do start to rise fixed yield investments like these will look less appealing and if you tried to sell them you may find them worth much less than you paid for them. So if you believe inflation/interest rates are on the rise and may be sizeable when they happen you might think twice.

However I do speculate that now people don't have to buy annuities with their pensions there may be more demand for prefs with safe looking companies. It could give their price a steady boost. We will have to wait and see.