Comments on: Will Investment Trust Dividends Hold Up?

By: Getting Minted

Getting Minted — Sun, 19 Apr 2020 23:36:31 +0000

Thanks for this useful roundup. I may be guilty of reaching for yield. I will be pleased if my current portfolio yield of 6.10% is actually all paid out over the next year. I’m most concerned about my high yield bond trust and my commercial property trust. I think the equity income trusts should probably hold up for at least one year.

By: Jeff

Jeff — Sun, 19 Apr 2020 10:21:14 +0000

I think investors may have slightly too much of a psychological bias towards dividends.
OK, an IT might be able to continue paying a dividend, but if that is paid from reserves, it essentially reduces the NAV of the trust and hence the valuation of the trust should drop.
Selling a few shares of an investment should produce exactly the same result.

From a tax perspective, if the assets have to be held in a taxed account, more people are likely to benefit from capital gains, rather than dividends, as the capital gains tax allowance is larger @ £12300 v just a £2000 tax free dividend allowance. Ideally, of course, if you hold assets in a taxed account, you use both allowances.
Then, for any higher rate taxpayer, the rate of tax on capital gains is lower than that for dividends. This is reversed for a basic rate taxpayer.

By: Al Cam

Al Cam — Thu, 16 Apr 2020 22:27:45 +0000

https://www.retirementace.co.uk/2020/04/will-investment-trust-dividends-hold.html is worth a look too