Desperately seeking income

Article Abstract:

Edinburgh Income and Value Trust from Edinburgh Fund Managers (EFM) offers an attractive initial dividend yield of 9.6% for the ordinary shares of the trust. This means that the overall portfolio has to produce a 6% yield, which is high in relation to the 2.3% that the All-Share index produces in terms of yield. The fund manager may have to seek dubious stocks to have to produce such a high yield. The ordinary shares in the trust will be under pressure if the aims are not met. Large yields may be seductive, but there tends to be a price to pay for them.

Management, Edinburgh Income and Value Trust

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Desperately seeking income

Article Abstract:

UK investors are faced with low interest rates on savings which look set to fall further. Split capital investment trust income shares are recommended by some brokers as a possible investment, and they can offer high yields. Income shares do, however, carry risks, and yields may be less than expected if the UK market hits a downturn. Dividends could also be subject to higher levels of taxation if the UK Labor Party wins and election, and this would affect returns from income shares.

Economic aspects

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High income can erode your wealth

Article Abstract:

Many income funds that offset charges against capital create the problem of capital erosion. Morgan Stanley's income fund has enough strength to charge to capital without this being a problem, while Exeter High Income has produced capital erosion in both money terms and real terms. Some managers argue that investors seek a high income so it is preferable to charge to capital. Others offering very high yields cannot support such yields and charge to capital.

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