Ideas for your Income Portfolio

NedS

I appreciate that income investing isn't / hasn't been in fashion lately, but maybe the rotation into value may change that.

Anyway, I'd like to start a thread for folks to share their ideas for income portfolios. I know I'm always looking for new opportunities to diversify / add to my income portfolio.

I'll start the ball rolling with what I have and what I've been looking at lately. I'd love to hear about yours.

The core holding in my income portfolio is CTY. I've held it on and off since 2013 and bought in heavily during the covid crash giving me a trailing yield of 5.5% Recent price recovery has seen a nice capital gain too alongside the ever increasing dividend.

I have also held a couple high yield corporate bond funds (Royal London Stirling Extra Yield and L&G High Income), both yielding around 5.6% presently. They compliment each other nicely giving some global diversification, the former holding mostly UK bonds and the latter mostly US bonds, each with a smaller amount of European (ex UK) holdings. The risks here would appear to be rising interest rates and the risk of company defaults once the current Covid stimulus money runs out.

I don't normally hold many company shares directly, but I recently bought into BATS at 2550 for it's 8% yield, figuring the price couldn't drop much further so hoping for some capital gains too which has played out quite well with the current price at around 2900 (up around 13.7% plus dividend in a couple months). It might be time to take some profits soon and look to buy back on any further price falls. I'm not very good at running my winners but all this volatility makes for opportunities.

I had held RDI REIT adding some property income, the share price of which got hammered during Covid, but a private equity buyout saw a 33.3% jump in share price so that's now gone, along with the decent yield it was giving. I had looked at adding Tritax (BBOX) last year before Covid whilst the price was around 140 but missed that boat and the price has now shot up to 190 dropping the dividend yield in the process, so still looking for some property holdings.

I've recently been looking at adding some renewables as there seem to be some great yields available but it appears I'm late to that party and many of the more popular trusts are already trading at hefty premiums that I'm not prepared to pay. I had looked at popular options in the sector such as Greencoat UK Wind (UKW), Bluefield Solar Income (BSIF) and Gresham House Energy Storage Fund (GRID) but they all look pricey. I'm currently watching Gore Street Energy Storage Fund (GSF) with a 6.5% yield trading at a small premium due to a current share offering priced at 102.0 yet shares on the open market are still trading at 106-107. If they dip a little closer to 102 I think I'll add some. What I'd really love is a trust that holds all of the above renewables trusts in one fund, picking the best from solar, wind and energy storage so I don't have to - does such a thing exist?

So what do you hold in your income portfolios, and why? What are you looking to add or have on your watchlists?

maxsteam

It seems odd that you are looking at renewables and BATS. They are completely at opposite ends of the CSR spectrum.

No, a fund holding your favourite funds does not exist. There's nothing wrong with holding lots of different funds but the funds themselves offer diversification. I would be inclined to suggest that, as your investing knowledge and experience grows, you should be moving more into individual stocks. There are plenty of stock screens around where you can find stocks which satisfy certain criteria and then you can sort them by yield, as that is what you are looking for, and research each company in turn, starting at the top of the list.

You can also look at the stocks held by your funds. CTY, for example, has an ongoing charge of around 0.36% so holding similar shares yourself is likely to increase your yield by a similar figure.

tacpot12

This is the income section of my retirement portfolio: 

UK Focus: 

iShares UK Dividend UCITS ETF 

The City of London Investment Trust

Edinburgh Investment Trust

The Mercantile Investment Trust

JP Morgan Claverhouse

Invesco Perpetual UK Smaller Companies plc 

Global:
JP Morgan Global Growth & Income

The Bankers Investment Trust

European Asset Trust

The North American Income Trust

Schroder Oriental Income Trust

Extra Yield at start of retirement: 
Invesco Perpetual Enhanced Income Ltd

AXA Framlington Managed Income

Artemis High Income

Henderson High Income Trust

Property:

iShares UK Property UCITS ETF

BMO Commercial Property Trust

This has been yielding just over 4% pa after charges for the last 3years, and I think the capital value has increased by about 2% pa - it's difficult to confirm the capital value increase as I don't track this for income section separately; it's done at the portfolio level.

I'm generally happy with everything except the Extra Yield section which has experienced more volatility than I was expecting. The BMO Property Trust is not doing well at the moment, but I wanted some property funds in the expectation that their values would not follow equity markets precisely. 

NedS

maxsteam said:

It seems odd that you are looking at renewables and BATS. They are completely at opposite ends of the CSR spectrum.

It's only odd if you value such things over yields or returns. Both are potentially good income investments.

george4064

I’m not investing for income so can’t really comment, but I do hold Tritax Big Box REIT (BBOX) as my Property allocation.

 I do like the warehouse/logistics sector which I think had many tailwinds as more consumers and businesses move to an e-commerce model. The COVID-19 pandemic has only sped up that process, which has pushed the shares up higher as demand for warehouses increase.

Happy to continue holding and re-investing dividends, which are very reliable for a number of reasons:

1. Warehouses are leased out on long leases, with nearly all of them have future increases written into the lease. Making the dividends index-linked so they keep up with inflation. Weighted average unexpired lease term across the portfolio of 13.8 years, LTV ratio of portfolio stands at only 30%.

2. Very good and stable tenants, largest being Amazon. There have been concerns about Amazon representing a too large % share of their business, which they have looked at and do not believe it should be a concern given Amazon’s strong business model. Other tenants include Tesco, Sainsbury’s /Argos, B&Q, M&S, Ocado, Apple, Next and more.

3. Strong pipeline for new warehouses, often pre-let to tenants before they are built which demonstrates the demand in this sector.

JohnWinder

Fashion aside, what does one do in retirement if the income in dividends, distributions, coupons or interest from one's portfolio isn't as much as one needs for 4 or 5 years, or is more than one needs for 5-10 years?

dunstonh

JohnWinder said:

Fashion aside, what does one do in retirement if the income in dividends, distributions, coupons or interest from one's portfolio isn't as much as one needs for 4 or 5 years, or is more than one needs for 5-10 years?

Not so many people have income portfolios nowadays.  Total return has replaced it.  Income portfolios went out of fashion with the credit crunch.

As the above posts indicate, there are still some that do it that way but the figures haven't really added up for over a decade.

underground99

maxsteam said:

It seems odd that you are looking at renewables and BATS. They are completely at opposite ends of the CSR spectrum.

You can also look at the stocks held by your funds. CTY, for example, has an ongoing charge of around 0.36% so holding similar shares yourself is likely to increase your yield by a similar figure.

If the goal is an ongoing source of income rather than purely 'total return' - infrastructure assets or cash cow consumer companies can both provide it, and the CSR/ESG elements do not need to be a driver. So it is not a contradiction to buy both.

No, a fund holding your favourite funds does not exist. There's nothing wrong with holding lots of different funds but the funds themselves offer diversification. I would be inclined to suggest that, as your investing knowledge and experience grows, you should be moving more into individual stocks. There are plenty of stock screens around where you can find stocks which satisfy certain criteria and then you can sort them by yield, as that is what you are looking for, and research each company in turn, starting at the top of the list.

GSF, GRID, UKW, BSIF are energy investment companies that hold a private portfolio of infrastructure assets e.g. wind farms, solar farms, energy storage systems. So, those 4 listed companies are 'individual stocks'.  You can't look through and buy the 'individual stocks' that they hold because what they hold are not stocks traded on a stock exchange, they are private assets. If you were looking at the energy storage space you might look at GSF or GRID or diversify and buy both. Likewise the infrastructure assets and projects held by entities like HICL and INPP are owned on a private equity basis, so when you buy one of them you are buying one 'investment company' and getting access to a portfolio but there is no option to buy the individual rail line, toll road, port or hospital itself.

You can also look at the stocks held by your funds. CTY, for example, has an ongoing charge of around 0.36% so holding similar shares yourself is likely to increase your yield by a similar figure.

That's true, if you replicated the 86 holdings of CTY in your own portfolio you would be cutting out the middleman - but aside from dealing costs you may find it a challenge to keep on top of the individual constituents, screening them and reading their news to understand if they are still worth having (which is what you get for your 0.36%) .

green_man

If you are actually after some ideas and some nice analysis, spreadsheets and graphs then you could do worse than have a look through Johns thread here:

https://forums.moneysavingexpert.com/discussion/4662291/monthly-income/p1

it’s been going since 2013 and the components changing periodically. John tends to update it a few times a year with progress and thoughts.

I do have an Income portfolio, all within an ISA, yielding around 4%. This provides around £600/month income (of which I take £500/month)


These are what is in my portfolio, don’t take this as any form or recommendation .

	ABERDEEN ASIAN INC ORD NPV  (AAIF)
	ABERDEEN LATIN AME ORD NPV  (ALAI)
	ARTEMIS FD MNGRS GLOBAL INCOME I DIS  (PKGLOB)
	ARTEMIS FD MNGRS STRATEGIC BOND MI DIS  (PKANOB)
	BLACKROCK WORLD MI ORD GBP0.05  (BRWM)
	CITY OF LONDON INV ORD GBP0.25  (CTY)
	EUROPEAN ASSETS TR ORD GBP0.10  (EAT)
	IMPERIAL BRANDS PL GBP0.10  (IMB)
	MURRAY INTL TRUST ORD GBP0.25  (MYI)
	PREMIER MITON GBL ORD GBP0.01  (PMGR)
	SCOT AMERICAN INV ORD GBP0.25  (SAIN)
	SSGA SPDR ETFS E I SPDR SP US DIV ARISTOCRATS  (USDV)
	TWENTYFOUR INCOME ORD RED GBP0.01  (TFIF)
	VANGUARD INV UK LT FTSE UK EQTY INC IDX INC  (VVUKEI)

Moe_The_Bartender

Take a look at Jupiter Monthly Alternative Income Fund which ticks many boxes. It has a target yield of 4.8% and its holdings are REITs, royalties (Hipgnosis Songs Fund) debt and contracts so provides genuine income. You won’t find any of the FTSE100 dividend payers in there.  

VT Gravis Clean Energy Income is also worth a look.

NedS

Moe_The_Bartender said:

Take a look at Jupiter Monthly Alternative Income Fund which ticks many boxes. It has a target yield of 4.8% and its holdings are REITs, royalties (Hipgnosis Songs Fund) debt and contracts so provides genuine income. You won’t find any of the FTSE100 dividend payers in there.  

VT Gravis Clean Energy Income is also worth a look.

Interesting, thanks. I had read about Hipgnosis buying up publishing rights for many major artists and had considered adding it as an alternative income stream. I will certainly take a look at the Jupiter fund.