Please note that tax, investment, pension and ISA rules can change and the information and any views contained in this article may now be inaccurate.
This trust invests in many companies still paying dividends
Investors seeking exposure to a wide range of UK companies still paying dividends should snap up BMO Capital & Income Investment Trust (BCI) as its portfolio contains many of
these prized names.
This trust could be an easier and more convenient way for income investors to back the dividend payers as it only requires buying a single product rather than lots of individual shares.
The trust is currently yielding 4.7% based on the amount of dividends it paid out in the last financial year. Investors should assume a slightly lower yield this year as there is no guarantee that most of its holdings will be immune from the dividend cuts seen across the market. We’re merely saying its portfolio looks better placed than many other income-focused trusts and funds.
Investors pay a relatively low fee of 0.58% for the portfolio to be actively managed by BMO’s Julian Cane.
BMO Capital & Income has beaten its FTSE All-Share benchmark over one, three, five, 10 and 20 years and an inflation-busting 4.1% hike in its dividend to 11.4p for the year to September 2019 marked 26 consecutive years of increased payouts from the trust.
Investment trusts are allowed to keep up to 15% of their revenue each year in a rainy day pot so they have spare cash to help keep paying dividends in harder times.
Pre-pandemic, Cane had prudently rebalanced the portfolio away from the UK market’s traditional highest income payers, where income was under threat, towards lower yielding, yet faster growing dividend plays.
Over recent years, he has reduced exposure to Royal Dutch Shell (RDSB), shielding shareholders from the oil major’s first dividend cut since World War Two.
Cane recently sold HSBC (HSBA), reinvesting the proceeds into OneSavings Bank (OSB), where he insists valuation is very low for the returns being generated, and Intermediate Capital (ICP), where he believes the market misunderstands the strength of the business and its growth prospects.
Admittedly OneSavings recently halted its dividend, however the BMO investment trust’s approach is to deliver a mix of income and capital gains so having the bank in the portfolio fits with the latter part of the strategy.
Cane recently added to soft drinks bottling colossus Coca-Cola HBC (CCH), while the portfolio now also includes investment manager Schroders (SDR) and brick maker Forterra (FORT), both bought following the market sell-off.