Hi Will,

I don’t think there are any other global trusts that pay enhanced dividends. There are a few in the Asia Pacific and Japan sectors, biotech/healthcare, and private equity. JPMorgan use the policy for several of their trusts. The AIC site now includes “Dividend Policy” on its website so you can check relatively easily:
https://www.theaic.co.uk/companydata/jpmorgan-asia-growth-income/dividends

There are a number of other trusts in the Global Equity Income sector, like Murray International, Henderson International Income, and Scottish American that don’t set dividend targets but do offer a higher yield than most mainstream global trusts. Of course, the question is whether you sacrificing long-term returns by focusing a little more on income.

You may have seen it already but there was a recent article on Monevator that looked at investing via a limited company which may be of interest.
https://monevator.com/family-investment-company-frequently-asked-questions-the-fic-faq/

I think they would probably reduce it although I believe the NAV has risen each year since they adopted this policy in 2016 so we haven’t seen an actual example yet.

Other trusts with these enhanced dividend policies seem to cut their dividends when their NAVs fall so I would expect JGGI to follow suit.

So it’s something to be aware of relative to other trusts who largely tend to have progressive policies and avoid cuts where possible.

One query with JGGI (maybe I missed it – I try not to think too much on Sundays!) and the dividend policy aiming to pay 4% of NAV – I do wonder what will happen in any year where the share price might have fallen significantly? Do they try and maintain the dividend or accept that the dividend will be reduced? Dividend payments with most trusts are much more steady than capital values so it is worth considering.

The basic fees should come down under this deal and the performance fee is being scrapped as well, which should boost returns a little too.

Given the size of companies that JGGI invests in, I’m not expecting there to be any material change in its portfolio as a result of adding the SCIN assets, even though the size of the fund is roughly doubling.

SCIN has jumped because it was previously trading at a fairly wide discount and that should effectively be eliminated when the two combine. However, JGGI has stayed at roughly the same premium level suggesting it should, largely, be business as normal. That could change over time, though, if the size of the enlarged fund means there aren’t enough buyers of JGGI shares to keep it at the same small premium that we’ve seen in recent years. Difficult to know if that will happen though – we’ll just have to wait and see.

Hope that helps!

Just been reading about the combination of JGGI and SCIN and unsure if this is a good thing or not as a JGGI holder. I see SCIN shares have jumped.

I read fees will be reduced , which is good , but performance is higher priority to me as I do not want to pay less and get less .

Is bigger better?

Cheers

Roy

Just as a follow-up on the subject of enhanced dividend policies, it looks Invesco Perpetual Smaller Companies has re-instated its 4% target today after dropping it this time last year.
https://investegate.co.uk/invesco-perpetual-uk-smaller-c–ipu-/prn/annual-financial-report/20210423070000P6178/

Yes, as there are oodles of capital reserves the trust can keep on paying out in down markets. Whether it makes sense to do so is a different question.

4% is the same as the Safe Withdrawal Rate that underpins a lot of Financial Independence Retire Early (FIRE) portfolios so there’s a certain logic to it being at that level. You can quibble whether it’s a bit too low or too high, but it’s in the same ballpark.

However, if markets have fallen heavily and stay depressed for a while, two-thirds of the dividend might be coming from selling investments at rock-bottom prices which isn’t ideal.

You could argue dividends may not fall as far as prices in such markets, so perhaps the one-third/two-thirds split becomes nearer to, say, half and half. Also, the trust can cherry-pick any disposals needed to fund the dividend by getting rid of its least favourite positions.

And there is always the option of tweaking the dividend policy for a short period although I suspect this would be a last resort.

So I think they are ways around this problem. As long as investors are aware of how the dividend is being created and size their positions accordingly then that should help matters, too.

If anything, the weird markets that we’ve had in the past year will have made these dividend policies even more popular. I think it’s almost unheard for dividends in the broader market to collapse as they did yet for share prices to move higher. So, these enhanced dividend payers have seen their payouts increase while a few more traditional income trusts have had to trim theirs back.

But the fact remains that these policies are relatively new and while they have been popular so far, investing fashions do change over time.

Obviously, if the NAV falls for a few years in succession, that would mean falling dividends as well and that could turn people off, meaning the small premium disappears and becomes a discount.

It’s a tricky one. I’ve got this trust plus IBT, BBH and BVT that follow a similar strategy. None of them are looking for income investments per se, so you have to be prepared for their dividends to be a lot more volatile than other trusts and plan accordingly.