One issue with the trust is that, to a much greater extent than with Evenlode’s fund, it has made capital gains at the expense of income. At the end of December its net yield came in at just 2 per cent.
But there are plenty of alternatives when it comes to income: of the 18 funds in our table that disclose their yields, 17 offer at least 3.5 per cent. At the time of our analysis, Schroder Income, Chelverton UK Equity Income, and Majedie UK Income all paid in excess of 5 per cent.
Notably, although both the Chelverton and Majedie offerings sustained heavy losses in 2018, the Schroder fund has managed to retain its healthy yield while simultaneously being one of the better performers over that period.
Other approaches
The table’s second-best performer overall has similarly combined strong returns with a decent yield, this time over a five-year time horizon. Man GLG’s UK Income offering, run by Henry Dixon, has returned £1,457 over a five-year period and yields 4.5 per cent – though it did suffer in 2018.
The fund lists several high-profile dividend payers among its top 10 holdings, with 7 per cent in Royal Dutch Shell, 4.3 per cent in HSBC and 3.7 per cent in Rio Tinto. However, its market-cap leanings are more varied than this suggests. The fund does have more than half of its assets in large and mega caps, but Mr Dixon has also allocated 22 per cent to small caps, 8.4 per cent to mid caps, and 5.2 per cent to micro caps.
This, and the fact that the fund’s 65 holdings mean it is much less concentrated than the top performer, suggests a more nuanced positioning when it comes to potential Brexit outcomes. The vehicle also had more than 7 per cent in cash at the end of November, which could drag on returns but does give it flexibility at times of volatility.
The third-ranked fund in the table, Troy Income and Growth Trust, again holds many of the big dividend names, but has diversified somewhat across sectors. Bar a 28 per cent allocation to consumer goods and 14 per cent in financials, the product tends not to invest more than 10 per cent in an individual sector.
These decisions being taken by UK income managers, particularly the high cash levels held by the Man GLG fund, point to the difficulties the sector could face as Brexit and other challenges draw closer. But as the shifting dividend yields of recent months have shown, such issues can also create opportunities for brave investors.
