Where to invest money primarily for supplemental income

Linton

JohnWinder said:

Thanks. If I’ve got it right, CoL over the period in question paid a dividend which increased each calendar year, but for two successive financial years (4/19 - 1/21, 8 consecutive quarters) the dividend was unchanged.
Back to calendar years: in 2011 the dividend was 13.28p, and in 2012 it was the same. https://www.dividendmax.com/united-kingdom/london-stock-exchange/investment-trusts/city-of-london-investment-trust/dividends

I thinnk things are confused because CoL switched friom annual to quarterly dividends in 2010/2011. They may have changed their financial year at the same time. So the final dividend paid in December 2010 relates to the previous financial year whilst the quarterly dividend paid in October 2010 relates to the new financial year.   Clearly they would not have raised their dividend in 2010 to the total of the October and Decemeber 2010 dividends - 15.91p p/s.

CoL raising its dividend every year does not arise as a by-product of skilled management but rather as a specific objective.  It now cannot afford not to if the directors want a secure job.

Audaxer

JohnWinder said:

Thanks. If I’ve got it right, CoL over the period in question paid a dividend which increased each calendar year, but for two successive financial years (4/19 - 1/21, 8 consecutive quarters) the dividend was unchanged.
Back to calendar years: in 2011 the dividend was 13.28p, and in 2012 it was the same. https://www.dividendmax.com/united-kingdom/london-stock-exchange/investment-trusts/city-of-london-investment-trust/dividends

This AIC page for CTY shows more clearly all the dividends going back to the 1970s and the financial year each dividend refers to:
City of London | Dividends | The AIC
For example, it shows that the dividend paid on 30/11/21 was the first dividend for the financial year 2022. I'm not sure I understand why that is, but looking down the list, they appear to be consistently reported that way back to the 1970s. So looking at it that way, they have increased dividends every financial year, albeit following Covid these increases have been minimal.

NedS

Audaxer said:

JohnWinder said:

Thanks. If I’ve got it right, CoL over the period in question paid a dividend which increased each calendar year, but for two successive financial years (4/19 - 1/21, 8 consecutive quarters) the dividend was unchanged.
Back to calendar years: in 2011 the dividend was 13.28p, and in 2012 it was the same. https://www.dividendmax.com/united-kingdom/london-stock-exchange/investment-trusts/city-of-london-investment-trust/dividends

This AIC page for CTY shows more clearly all the dividends going back to the 1970s and the financial year each dividend refers to:
City of London | Dividends | The AIC
For example, it shows that the dividend paid on 30/11/21 was the first dividend for the financial year 2022. I'm not sure I understand why that is, but looking down the list, they appear to be consistently reported that way back to the 1970s. So looking at it that way, they have increased dividends every financial year, albeit following Covid these increases have been minimal.

Indeed. The reason CTY were not only able to continue to pay a dividend, but actually raise it is because as an Investment Trust they are keep a little revenue back in reserve to draw upon in more difficult times and help smooth income for investors (and I know @Audaxer is fully aware of this). CTY had to draw on their revenue reserves during 2020 to continue paying a rising dividend, and moving forward will have a balancing act between trying to grow the dividend in line with inflation whilst at the same time replenishing the revenue reserves ready for the next crisis.

By comparison, investing in an OEIC equity income fund will pay out all income each year, providing bumper income in good years with a severe haircut in times of crisis. This is obviously not great for pensioners reliant on a steady income to pay the bills.

If you bought CTY at knock down prices during Covid, you would have locked in a pretty secure 6.5% dividend yield, which compares very favourably to the oft touted 3.5% SWR for a UK investor. A crisis provides great opportunity for investors.

Audaxer

NedS said:

Audaxer said:

JohnWinder said:

Thanks. If I’ve got it right, CoL over the period in question paid a dividend which increased each calendar year, but for two successive financial years (4/19 - 1/21, 8 consecutive quarters) the dividend was unchanged.
Back to calendar years: in 2011 the dividend was 13.28p, and in 2012 it was the same. https://www.dividendmax.com/united-kingdom/london-stock-exchange/investment-trusts/city-of-london-investment-trust/dividends

This AIC page for CTY shows more clearly all the dividends going back to the 1970s and the financial year each dividend refers to:
City of London | Dividends | The AIC
For example, it shows that the dividend paid on 30/11/21 was the first dividend for the financial year 2022. I'm not sure I understand why that is, but looking down the list, they appear to be consistently reported that way back to the 1970s. So looking at it that way, they have increased dividends every financial year, albeit following Covid these increases have been minimal.

If you bought CTY at knock down prices during Covid, you would have locked in a pretty secure 6.5% dividend yield, which compares very favourably to the oft touted 3.5% SWR for a UK investor. A crisis provides great opportunity for investors.

Yes, it does compare very favourably to the 3.5% SWR, especially as the capital has also risen so much since 1988.

I see that the CTY dividends in 1988 amounted to 2.65p per share, and by 2021 they had risen to 19.1p per share. That is quite a rise which I think would be well ahead of inflation over that period.

Prism

NedS said:

Audaxer said:

JohnWinder said:

Thanks. If I’ve got it right, CoL over the period in question paid a dividend which increased each calendar year, but for two successive financial years (4/19 - 1/21, 8 consecutive quarters) the dividend was unchanged.
Back to calendar years: in 2011 the dividend was 13.28p, and in 2012 it was the same. https://www.dividendmax.com/united-kingdom/london-stock-exchange/investment-trusts/city-of-london-investment-trust/dividends

This AIC page for CTY shows more clearly all the dividends going back to the 1970s and the financial year each dividend refers to:
City of London | Dividends | The AIC
For example, it shows that the dividend paid on 30/11/21 was the first dividend for the financial year 2022. I'm not sure I understand why that is, but looking down the list, they appear to be consistently reported that way back to the 1970s. So looking at it that way, they have increased dividends every financial year, albeit following Covid these increases have been minimal.

Indeed. The reason CTY were not only able to continue to pay a dividend, but actually raise it is because as an Investment Trust they are keep a little revenue back in reserve to draw upon in more difficult times and help smooth income for investors (and I know @Audaxer is fully aware of this). CTY had to draw on their revenue reserves during 2020 to continue paying a rising dividend, and moving forward will have a balancing act between trying to grow the dividend in line with inflation whilst at the same time replenishing the revenue reserves ready for the next crisis.

By comparison, investing in an OEIC equity income fund will pay out all income each year, providing bumper income in good years with a severe haircut in times of crisis. This is obviously not great for pensioners reliant on a steady income to pay the bills.

If you bought CTY at knock down prices during Covid, you would have locked in a pretty secure 6.5% dividend yield, which compares very favourably to the oft touted 3.5% SWR for a UK investor. A crisis provides great opportunity for investors.

I think its worth adding that revenue reserves are not the only option available to investment trusts. If they really want to preserve a steady and increasing dividend then they can choose to pay out of capital along side dividends. It completely detaches the dividend income they receive from what they choose to pay. It removes a lot of the accounting that goes into creating revenue reserves. In fact revenue reserves are not actually reserves at all. Its invested just like everything else and all trusts need to work out which shares to sell to fund their next dividend payout.

NedS

Prism said:

NedS said:

Audaxer said:

JohnWinder said:

Thanks. If I’ve got it right, CoL over the period in question paid a dividend which increased each calendar year, but for two successive financial years (4/19 - 1/21, 8 consecutive quarters) the dividend was unchanged.
Back to calendar years: in 2011 the dividend was 13.28p, and in 2012 it was the same. https://www.dividendmax.com/united-kingdom/london-stock-exchange/investment-trusts/city-of-london-investment-trust/dividends

This AIC page for CTY shows more clearly all the dividends going back to the 1970s and the financial year each dividend refers to:
City of London | Dividends | The AIC
For example, it shows that the dividend paid on 30/11/21 was the first dividend for the financial year 2022. I'm not sure I understand why that is, but looking down the list, they appear to be consistently reported that way back to the 1970s. So looking at it that way, they have increased dividends every financial year, albeit following Covid these increases have been minimal.

Indeed. The reason CTY were not only able to continue to pay a dividend, but actually raise it is because as an Investment Trust they are keep a little revenue back in reserve to draw upon in more difficult times and help smooth income for investors (and I know @Audaxer is fully aware of this). CTY had to draw on their revenue reserves during 2020 to continue paying a rising dividend, and moving forward will have a balancing act between trying to grow the dividend in line with inflation whilst at the same time replenishing the revenue reserves ready for the next crisis.

By comparison, investing in an OEIC equity income fund will pay out all income each year, providing bumper income in good years with a severe haircut in times of crisis. This is obviously not great for pensioners reliant on a steady income to pay the bills.

If you bought CTY at knock down prices during Covid, you would have locked in a pretty secure 6.5% dividend yield, which compares very favourably to the oft touted 3.5% SWR for a UK investor. A crisis provides great opportunity for investors.

I think its worth adding that revenue reserves are not the only option available to investment trusts. If they really want to preserve a steady and increasing dividend then they can choose to pay out of capital along side dividends. It completely detaches the dividend income they receive from what they choose to pay. It removes a lot of the accounting that goes into creating revenue reserves. In fact revenue reserves are not actually reserves at all. Its invested just like everything else and all trusts need to work out which shares to sell to fund their next dividend payout.

Yes, and some Investment Trusts do choose to pay regular dividends out of capital rather than revenue (income). Examples of these are EAT, JAGI, JCGI, JGGI etc. However, although CTY has this option (as do all ITs), their strategy predominantly invests in companies that produce an income that can cover the Trusts dividend, whereas the others are paying out (distributing) your own capital as a dividend which is more akin to a total return strategy whereby you sell 4% of your holding per year, except here the trust is doing it for you.

coyrls

NedS said:

Prism said:

NedS said:

Audaxer said:

JohnWinder said:

Thanks. If I’ve got it right, CoL over the period in question paid a dividend which increased each calendar year, but for two successive financial years (4/19 - 1/21, 8 consecutive quarters) the dividend was unchanged.
Back to calendar years: in 2011 the dividend was 13.28p, and in 2012 it was the same. https://www.dividendmax.com/united-kingdom/london-stock-exchange/investment-trusts/city-of-london-investment-trust/dividends

This AIC page for CTY shows more clearly all the dividends going back to the 1970s and the financial year each dividend refers to:
City of London | Dividends | The AIC
For example, it shows that the dividend paid on 30/11/21 was the first dividend for the financial year 2022. I'm not sure I understand why that is, but looking down the list, they appear to be consistently reported that way back to the 1970s. So looking at it that way, they have increased dividends every financial year, albeit following Covid these increases have been minimal.

Indeed. The reason CTY were not only able to continue to pay a dividend, but actually raise it is because as an Investment Trust they are keep a little revenue back in reserve to draw upon in more difficult times and help smooth income for investors (and I know @Audaxer is fully aware of this). CTY had to draw on their revenue reserves during 2020 to continue paying a rising dividend, and moving forward will have a balancing act between trying to grow the dividend in line with inflation whilst at the same time replenishing the revenue reserves ready for the next crisis.

By comparison, investing in an OEIC equity income fund will pay out all income each year, providing bumper income in good years with a severe haircut in times of crisis. This is obviously not great for pensioners reliant on a steady income to pay the bills.

If you bought CTY at knock down prices during Covid, you would have locked in a pretty secure 6.5% dividend yield, which compares very favourably to the oft touted 3.5% SWR for a UK investor. A crisis provides great opportunity for investors.

I think its worth adding that revenue reserves are not the only option available to investment trusts. If they really want to preserve a steady and increasing dividend then they can choose to pay out of capital along side dividends. It completely detaches the dividend income they receive from what they choose to pay. It removes a lot of the accounting that goes into creating revenue reserves. In fact revenue reserves are not actually reserves at all. Its invested just like everything else and all trusts need to work out which shares to sell to fund their next dividend payout.

Yes, and some Investment Trusts do choose to pay regular dividends out of capital rather than revenue (income). Examples of these are EAT, JAGI, JCGI, JGGI etc. However, although CTY has this option (as do all ITs), their strategy predominantly invests in companies that produce an income that can cover the Trusts dividend, whereas the others are paying out (distributing) your own capital as a dividend which is more akin to a total return strategy whereby you sell 4% of your holding per year, except here the trust is doing it for you.

Exactly, it's an implementation of a SWR strategy but with a less strict requirement.  Increasing dividends every year is less demanding than increasing dividends every year by the rate of inflation.

Audaxer

NedS said:

Prism said:

NedS said:

Audaxer said:

JohnWinder said:

Thanks. If I’ve got it right, CoL over the period in question paid a dividend which increased each calendar year, but for two successive financial years (4/19 - 1/21, 8 consecutive quarters) the dividend was unchanged.
Back to calendar years: in 2011 the dividend was 13.28p, and in 2012 it was the same. https://www.dividendmax.com/united-kingdom/london-stock-exchange/investment-trusts/city-of-london-investment-trust/dividends

This AIC page for CTY shows more clearly all the dividends going back to the 1970s and the financial year each dividend refers to:
City of London | Dividends | The AIC
For example, it shows that the dividend paid on 30/11/21 was the first dividend for the financial year 2022. I'm not sure I understand why that is, but looking down the list, they appear to be consistently reported that way back to the 1970s. So looking at it that way, they have increased dividends every financial year, albeit following Covid these increases have been minimal.

Indeed. The reason CTY were not only able to continue to pay a dividend, but actually raise it is because as an Investment Trust they are keep a little revenue back in reserve to draw upon in more difficult times and help smooth income for investors (and I know @Audaxer is fully aware of this). CTY had to draw on their revenue reserves during 2020 to continue paying a rising dividend, and moving forward will have a balancing act between trying to grow the dividend in line with inflation whilst at the same time replenishing the revenue reserves ready for the next crisis.

By comparison, investing in an OEIC equity income fund will pay out all income each year, providing bumper income in good years with a severe haircut in times of crisis. This is obviously not great for pensioners reliant on a steady income to pay the bills.

If you bought CTY at knock down prices during Covid, you would have locked in a pretty secure 6.5% dividend yield, which compares very favourably to the oft touted 3.5% SWR for a UK investor. A crisis provides great opportunity for investors.

I think its worth adding that revenue reserves are not the only option available to investment trusts. If they really want to preserve a steady and increasing dividend then they can choose to pay out of capital along side dividends. It completely detaches the dividend income they receive from what they choose to pay. It removes a lot of the accounting that goes into creating revenue reserves. In fact revenue reserves are not actually reserves at all. Its invested just like everything else and all trusts need to work out which shares to sell to fund their next dividend payout.

Yes, and some Investment Trusts do choose to pay regular dividends out of capital rather than revenue (income). Examples of these are EAT, JAGI, JCGI, JGGI etc. However, although CTY has this option (as do all ITs), their strategy predominantly invests in companies that produce an income that can cover the Trusts dividend, whereas the others are paying out (distributing) your own capital as a dividend which is more akin to a total return strategy whereby you sell 4% of your holding per year, except here the trust is doing it for you.

I think some of these trusts have a policy to pay a fixed percentage of the NAV each year - I think JGGI's is 4% of the NAV, presumably as at a certain date each year? So even although they will be paying some or all of it it out of capital, you won't get an increased dividend in years where the NAV has fallen. I don't think it's a bad policy as I was thinking of adding JGGI to my portfolio.

Prism

Audaxer said:

NedS said:

Prism said:

NedS said:

Audaxer said:

JohnWinder said:

Thanks. If I’ve got it right, CoL over the period in question paid a dividend which increased each calendar year, but for two successive financial years (4/19 - 1/21, 8 consecutive quarters) the dividend was unchanged.
Back to calendar years: in 2011 the dividend was 13.28p, and in 2012 it was the same. https://www.dividendmax.com/united-kingdom/london-stock-exchange/investment-trusts/city-of-london-investment-trust/dividends

This AIC page for CTY shows more clearly all the dividends going back to the 1970s and the financial year each dividend refers to:
City of London | Dividends | The AIC
For example, it shows that the dividend paid on 30/11/21 was the first dividend for the financial year 2022. I'm not sure I understand why that is, but looking down the list, they appear to be consistently reported that way back to the 1970s. So looking at it that way, they have increased dividends every financial year, albeit following Covid these increases have been minimal.

Indeed. The reason CTY were not only able to continue to pay a dividend, but actually raise it is because as an Investment Trust they are keep a little revenue back in reserve to draw upon in more difficult times and help smooth income for investors (and I know @Audaxer is fully aware of this). CTY had to draw on their revenue reserves during 2020 to continue paying a rising dividend, and moving forward will have a balancing act between trying to grow the dividend in line with inflation whilst at the same time replenishing the revenue reserves ready for the next crisis.

By comparison, investing in an OEIC equity income fund will pay out all income each year, providing bumper income in good years with a severe haircut in times of crisis. This is obviously not great for pensioners reliant on a steady income to pay the bills.

If you bought CTY at knock down prices during Covid, you would have locked in a pretty secure 6.5% dividend yield, which compares very favourably to the oft touted 3.5% SWR for a UK investor. A crisis provides great opportunity for investors.

I think its worth adding that revenue reserves are not the only option available to investment trusts. If they really want to preserve a steady and increasing dividend then they can choose to pay out of capital along side dividends. It completely detaches the dividend income they receive from what they choose to pay. It removes a lot of the accounting that goes into creating revenue reserves. In fact revenue reserves are not actually reserves at all. Its invested just like everything else and all trusts need to work out which shares to sell to fund their next dividend payout.

Yes, and some Investment Trusts do choose to pay regular dividends out of capital rather than revenue (income). Examples of these are EAT, JAGI, JCGI, JGGI etc. However, although CTY has this option (as do all ITs), their strategy predominantly invests in companies that produce an income that can cover the Trusts dividend, whereas the others are paying out (distributing) your own capital as a dividend which is more akin to a total return strategy whereby you sell 4% of your holding per year, except here the trust is doing it for you.

I think some of these trusts have a policy to pay a fixed percentage of the NAV each year - I think JGGI's is 4% of the NAV, presumably as at a certain date each year? So even although they will be paying some or all of it it out of capital, you won't get an increased dividend in years where the NAV has fallen. I don't think it's a bad policy as I was thinking of adding JGGI to my portfolio.

Surely if you selected any accumulation fund and then sold 1% ever 3 months you would get exactly the same effect but much more choice?

Linton

Prism said:

Audaxer said:

NedS said:

Prism said:

NedS said:

Audaxer said:

JohnWinder said:

Thanks. If I’ve got it right, CoL over the period in question paid a dividend which increased each calendar year, but for two successive financial years (4/19 - 1/21, 8 consecutive quarters) the dividend was unchanged.
Back to calendar years: in 2011 the dividend was 13.28p, and in 2012 it was the same. https://www.dividendmax.com/united-kingdom/london-stock-exchange/investment-trusts/city-of-london-investment-trust/dividends

This AIC page for CTY shows more clearly all the dividends going back to the 1970s and the financial year each dividend refers to:
City of London | Dividends | The AIC
For example, it shows that the dividend paid on 30/11/21 was the first dividend for the financial year 2022. I'm not sure I understand why that is, but looking down the list, they appear to be consistently reported that way back to the 1970s. So looking at it that way, they have increased dividends every financial year, albeit following Covid these increases have been minimal.

Indeed. The reason CTY were not only able to continue to pay a dividend, but actually raise it is because as an Investment Trust they are keep a little revenue back in reserve to draw upon in more difficult times and help smooth income for investors (and I know @Audaxer is fully aware of this). CTY had to draw on their revenue reserves during 2020 to continue paying a rising dividend, and moving forward will have a balancing act between trying to grow the dividend in line with inflation whilst at the same time replenishing the revenue reserves ready for the next crisis.

By comparison, investing in an OEIC equity income fund will pay out all income each year, providing bumper income in good years with a severe haircut in times of crisis. This is obviously not great for pensioners reliant on a steady income to pay the bills.

If you bought CTY at knock down prices during Covid, you would have locked in a pretty secure 6.5% dividend yield, which compares very favourably to the oft touted 3.5% SWR for a UK investor. A crisis provides great opportunity for investors.

I think its worth adding that revenue reserves are not the only option available to investment trusts. If they really want to preserve a steady and increasing dividend then they can choose to pay out of capital along side dividends. It completely detaches the dividend income they receive from what they choose to pay. It removes a lot of the accounting that goes into creating revenue reserves. In fact revenue reserves are not actually reserves at all. Its invested just like everything else and all trusts need to work out which shares to sell to fund their next dividend payout.

Yes, and some Investment Trusts do choose to pay regular dividends out of capital rather than revenue (income). Examples of these are EAT, JAGI, JCGI, JGGI etc. However, although CTY has this option (as do all ITs), their strategy predominantly invests in companies that produce an income that can cover the Trusts dividend, whereas the others are paying out (distributing) your own capital as a dividend which is more akin to a total return strategy whereby you sell 4% of your holding per year, except here the trust is doing it for you.

I think some of these trusts have a policy to pay a fixed percentage of the NAV each year - I think JGGI's is 4% of the NAV, presumably as at a certain date each year? So even although they will be paying some or all of it it out of capital, you won't get an increased dividend in years where the NAV has fallen. I don't think it's a bad policy as I was thinking of adding JGGI to my portfolio.

Surely if you selected any accumulation fund and then sold 1% ever 3 months you would get exactly the same effect but much more choice?

1) Selling 1% every 3 months would require require time, effort, and charges.  Dividends can turn up for free with zero effort/time.
2)  Funds which aim to distribute a steady or fixed % dividend will set up their asset allocation taking into account their dividend strategy.  A randomly chosen Acc fund wont.