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High yields on commodity trusts tempt investors

There are signs that high yields are tempting investors back to commodities-focused investment trusts, but analysis group Stifel warned that current yields may not be sustainable.

Data from the Association of Investment Companies (AIC) shows that BlackRock Commodities Income was among the most viewed investment companies in the third quarter on the AIC website. It moved up the rankings from 16th place in the second quarter to 2nd place, while the group’s World Mining trust also moved higher.

A Stifel report into the highest yielding investment trusts showed commodities-focused funds at the top of the heap. BlackRock World Mining tops the list of the highest yielders with an 8.8% yield. However, the group warned that yields may not be sustainable given the issues in the mining sector.

The report added: “There must also be a question mark over the sustainability of dividends at BlackRock Latin American which has a large exposure to Brazil (46% of total assets at 31/08/15) and JPMorgan Russian, which has an historical yield of 4.1%.”

The report found that 18 trusts (with market caps in excess of £80m) investing in equities had a yield of 4.0% or higher, which is a similar number to a year ago. In addition, the property, infrastructure, renewable energy and debt fund sectors also continue to have high yields.

There was significant overlap between the highest yielding trusts and the most viewed on the AIC website, suggesting yield continues to be a top priority for investors in investment trusts. For the second quarter in a row, Murray International – which has a current yield of 5.4% after a difficult run of performance – topped the ‘most viewed’ list.

The Stifel report said: “Murray International has had a tough year, with the NAV TR down 7% and an 18% fall in the share price (capital only) compared with a 7% fall in the sector average over the same period. However, this decline has resulted in an increase in the dividend yield to an attractive 5.4%.”

In the UK, Stifel highlighted City of London Trust, managed by Job Curtis, which has a yield of 4.0%, Merchants, with a yield of 5.5% and the Schroder Income Growth, run by Sue Noffke, which pays a 4.0% fully covered dividend, and trading on a 3% discount to NAV. Internationally, it highlighted Henderson Far East Income and JPMorgan Global Emerging Income both having yields in excess of 5%.  

Part of Mark Allen.