European Assets Trust

Audaxer

le_loup wrote: »

If you have it in an ISA and you want a 6% yield, why not.

A 6% yield is good, but I wonder if it is sustainable with an IT like this as the share price has fallen by over 18% for the year?

If a maximum of 4% is generally accepted as a Safe Withdrawal rate, surely 6% is not sustainable over the long term?

takesyourchances

That's my thoughts with the ISA and I bought earlier this year and my holding is down 20%. It's the one that's dropped the most in my portfolio and as I plan to buy and hold thought this would be a top up chance. at 20% less than I paid several months ago. I've a few thousand clearing to me this week which I plan to use topping some holdings up.

takesyourchances

Audaxer wrote: »

A 6% yield is good, but I wonder if it is sustainable with an IT like this as the share price has fallen by over 18% for the year?

If a maximum of 4% is generally accepted as a Safe Withdrawal rate, surely 6% is not sustainable over the long term?

Be interested in thoughts on this, I hold some EAT as part of a wilder IT portfolio.

ColdIron

Those dividends come at a cost to growth so you might wonder about sustainability. Could be handy in a Bed & ISA project where you are knocking on the door of your CGT allowance

• A high distribution policy has been adopted and dividends are paid from a mix of income and capital reserves.

Thrugelmir

le_loup wrote: »

If you have it in an ISA and you want a 6% yield, why not.

Is the dividend sustainable?

Audaxer

ColdIron wrote: »

Those dividends come at a cost to growth so you might wonder about sustainability. Could be handy in a Bed & ISA project where you are knocking on the door of your CGT allowance

• A high distribution policy has been adopted and dividends are paid from a mix of income and capital reserves.

If you were just looking for dividends rather than growth, do you think ITs or funds with these sort of dividends could churn out growing dividends to last a 30 year retirement? So is it realistic to think £10k invested in EAT could produce dividends of £600, growing every year, or nearly every year, throughout a 30 year retirement and you would still have the capital there after 30 years?

ColdIron

I think a growing 7% dividend for 30 years would be a very hard trick to pull off. If your fund invests in the components of major indices, like the FTSE All Share, S&P500, then unless those underlying companies produce those sort of dividends then the fund can't. Some ITs can sell down their capital and return it to you as a dividend but this obviously has implications for growth. Some sectors such as high yield bonds can produce very high dividends but again this is at the cost of growth and increased volatility. Infrastructure can have high dividends but at the cost of a decreasing capital base. You can't magic dividends from thin air

It's like the project management triangle. You can do it quick, you can do it cheap or you can do it right. Pick any two

le_loup

Well, I've held it from 2014 and after this year it's flat - but - I've had 6% a year as income and that's what I'm after.

Audaxer

ColdIron wrote: »

I think a growing 7% dividend for 30 years would be a very hard trick to pull off. If your fund invests in the components of major indices, like the FTSE All Share, S&P500, then unless those underlying companies produce those sort of dividends then the fund can't. Some ITs can sell down their capital and return it to you as a dividend but this obviously has implications for growth. Some sectors such as high yield bonds can produce very high dividends but again this is at the cost of growth and increased volatility. Infrastructure can have high dividends but at the cost of a decreasing capital base. You can't magic dividends from thin air

It's like the project management triangle. You can do it quick, you can do it cheap or you can do it right. Pick any two

I've just had a look at this IT on Trustnet. It was launched back in 1972 and had averaged 11.9% Total Return over that 46 year period, and even 6.4% without dividends reinvested. So it seems that level of dividend is sustainable as well as growing the capital over the long term.

short_butt_sweet

Audaxer wrote: »

I've just had a look at this IT on Trustnet. It was launched back in 1972 and had averaged 11.9% Total Return over that 46 year period, and even 6.4% without dividends reinvested. So it seems that level of dividend is sustainable as well as growing the capital over the long term.

well, RPI since 1972 has been about 5.7% compounded. so the capital return alone has slightly more than kept up with inflation. which is pretty good.

but wasn't the policy of paying out a dividend partly from capital adopted much more recently?

also, if long-term compounded returns are X%, that does not imply that X% is a safe withdrawal rate. because of sequence of returns risk, the safe withdrawal rate is lower than the expected return.

so IMHO the question remains: will european assets trust EAT itself?