Ideas for your Income Portfolio

Thrugelmir

Don't get too hung up over style. Always select your investments on the basis of the underlying holding(s). Whether it's growth or income, or a mixture of the two doesn't matter.  Better in my personal view to select/ invest in specific markets. Good income opportunities come along every once in a while for specific stocks. In last years hiatus managed to pick up Total and Legal & General at yields of 10.5% and 8.2% respectively. for example. Both stocks being totally unloved at the time. These will now sit as long term holdings in the portfolio. Equally build a sizable position in River & Mercantile Micro Cap. pays no dividend but returns capital when the fund value grows too large. 

bostonerimus

dunstonh said:

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.

Agreed, take some dividends and interest there, some capital gains here, maybe a little planned actual capital and combine it with some bad times cash. Total return and a well planned drawdown strategy is usual in these days of low interest rates.

NedS

NedS said:

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.

I picked up Gore Street Energy Storage Fund (GSF) a few days after posting this at 102.8p (6.8% trailing yield), and today added NextEnergy Solar Fund (NESF) at 7% yield and only a small premium to NAV (and was delighted to discover there was no stamp duty to pay). I'm also currently watching Foresight Solar Fund Ltd (FSFL) and JLEN as potential buys for the income portfolio. I'm hoping these don't have much further to fall after relatively large falls during the last 18 months, and offer a reasonable entry point.

Thrugelmir

NedS said:

NedS said:

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.

I picked up Gore Street Energy Storage Fund (GSF) a few days after posting this at 102.8p (6.8% trailing yield), and today added NextEnergy Solar Fund (NESF) at 7% yield and only a small premium to NAV (and was delighted to discover there was no stamp duty to pay). I'm also currently watching Foresight Solar Fund Ltd (FSFL) and JLEN as potential buys for the income portfolio. I'm hoping these don't have much further to fall after relatively large falls during the last 18 months, and offer a reasonable entry point.

There's other options as well that are worth investigating further. Some of the below are still in early stages of investing cash raised. 

DORE
RNEP
ORIT
SEIT
TEEC
USFP
GSEO
GCP
PMGR
AERS

ChilliBob

From what I have been reading in other places I thought the view was mostly to aim for capital appreciation and then disposal as necessary if you needed cash. If such decent investments happened to pay dividends then great, but don't chase after them.

I'm guessing others feel differently on this thread then?

I was originally quite attracted to this idea, no need to sell, essentially like getting paid but then I felt a lot of the 'income' specific examples we're a bit mediocre.

I'll give some of the ones in this thread a look though in their own right 

dunstonh

From what I have been reading in other places I thought the view was mostly to aim for capital appreciation and then disposal as necessary if you needed cash. If such decent investments happened to pay dividends then great, but don't chase after them.
I'm guessing others feel differently on this thread then?

Total return has been posted about on this thread by myself and some others but the OP appears wedded to income.  It is their thread and their choice and it's not as if income is an unsuitable strategy.  It just hasn't been a very good one for a long time.

ChilliBob

Interestingly a HL article combines Total Return and Multi Asset funds, which on the face of it seems a little odd, as surely total return can apply to any fund, whether multi asset or single asset. 

NedS

dunstonh said:

From what I have been reading in other places I thought the view was mostly to aim for capital appreciation and then disposal as necessary if you needed cash. If such decent investments happened to pay dividends then great, but don't chase after them.
I'm guessing others feel differently on this thread then?

Total return has been posted about on this thread by myself and some others but the OP appears wedded to income.  It is their thread and their choice and it's not as if income is an unsuitable strategy.  It just hasn't been a very good one for a long time.

That is a matter of opinion. I'm not retired yet, but I'm wondering how well I would have slept at night last year if I were dependent upon a drawdown strategy and my portfolio lost 50% in less than a month in the covid crash. Conversely, my income investments carried on paying a steady dividend yield throughout and many have increased their payouts this year in line with inflation or above. If I can achieve the income I need from income alone, without having to ever sell any assets, how is that not a good strategy if it meets my investment needs? Sure, a growth and drawdown strategy may have outperformed during the last 10 years (past performance ... ), one could also say it's easy to be wedded to a growth/drawdown strategy at the end(?) of a bull market.

BTW, I'm not totally wedded to an income strategy - I have split my portfolio according to my needs. I have an income portfolio designed to meet my income needs, and a growth portfolio designed to achieve some long term growth (not dissimilar to @Linton , who has an income, growth and wealth preservation split).

eskbanker

NedS said:
If I can achieve the income I need from income alone, without having to ever sell any assets, how is that not a good strategy if it meets my investment needs?

Perhaps that's a rhetorical question, but clearly a strategy that meets your needs is a good one!  Not necessarily the best, but it's frequently observed on here that it's not always necessary to aim for 'best' when 'sufficient' will do....

Linton

ChilliBob said:

From what I have been reading in other places I thought the view was mostly to aim for capital appreciation and then disposal as necessary if you needed cash. If such decent investments happened to pay dividends then great, but don't chase after them.

I'm guessing others feel differently on this thread then?

I was originally quite attracted to this idea, no need to sell, essentially like getting paid but then I felt a lot of the 'income' specific examples we're a bit mediocre.

I'll give some of the ones in this thread a look though in their own right 

I diagree that one should aim for capital appreciation as opposed to income.  What one should aim for is an appropriate mixture of both.  If one's need is for ongoing short term income whatever strategy gives the best performance in the long term is pretty irrelevent.  What is important is that you actually get the income you need at minimum risk and effort.

Yes income companies have performed relatively poorly in the past few years  as have value companies in general compared with growth dominated by the tech giants.  But the situation has been very different in the past when value was seen as the tortoise that in the long term overtook the hare.  The pendulum will swing again sometime in the future.