By Patrick Sanders, Reporter, Trustnet, 23 December 2024:
Fund selectors give their income fund picks for investors looking for high quality companies and growing dividends.
Income funds remain a crucial component of many investors’ portfolios, particularly for those approaching retirement and looking for a steady source of income. However, income funds are not exclusive to older investors. Indeed, following a year of interest rate cuts, the outlook for income-focused strategies may be brightening..
NextEnergy Solar
In the investment trust space, James Carthew, head of investment companies at QuotedData, was bullish on renewable energy and found the £373m NextEnergy Solar trust compelling.
Over three years the portfolio ranked in the second quartile of the IT Renewable Energy sector, although the tough backdrop for renewables – caused by higher interest rates – means the trust down by 18.7% in this period.
However, Carthew concluded the portfolio was due for a turnaround. The trust operates at a 32% price discount compared to its net asset value (NAV), with a “whopping dividend yield” of 13.06%, which would be covered by 1.1x to 1.3x cash earnings.
Furthermore, Carthew explained that the company started a capital recycling plan in 2023, which has helped fund share buybacks and narrow the discount, which will provide the opportunity for a broad variety of new investments moving forward.
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