The figures were wide-ranging, with Duet Real Estate Finance’s dividend yield of 14.3% topping the list.
However, Laith Khalaf, senior analyst at Hargreaves Lansdown, outlined why, despite appearances, high-yielding companies are not necessarily a favourable investment.
He said: “If you are getting yield that high then it tells you something about the security of the underlying holdings i.e. your capital is at risk. Also, with investment trusts there is a bit of a quirk associated with yield which is that figures are broadly based on the price. So a trust which is heavily-discounted may have an artificially high yield which does not represent the yield on the underlying portfolio.”
The AIC paper also revealed that 50% of high-yielding investment companies are trading at a premium – a statistic that Khalaf gave some background to.
“That highlights the premium that investors are putting on income at the moment,” he explained. “There are such low cash rates and income is pretty thin on the ground, so trusts that are producing real and sustainable income are going to be at a premium. Some trusts are trading at a very low discount, so that is going to inflate the yield.”
Of the AIC sectors, UK equity income was well represented in the list with 16 companies, while debt and global equity income registered 13 and nine entrants respectively.
“Global equity income should be finding decent dividend opportunities as well, but not all markets are as high-yielding as the UK,” Khalaf said.
“The UK market is generally one of the highest-yielding markets. The practice of paying dividend is pretty well-entrenched in FTSE companies, where it is around 3-3.5%. The same is also true if you look at Japan, whereas in the US it is closer to 2-2.5%. If you are running a diversified global portfolio then it may be that the lower income is coming from those companies.”
Sectors that contained the most companies trading at a discount included European emerging markets, Latin America and environmental, commodities and natural resources.
