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Can investors rely on high-yield trusts to deliver on their promise?

Ian Conway, Shares Magazine, 18 August 2022:

With inflation eating away at investors’ income, high-yield trusts can look very appealing. However, the big question investors should ask before committing themselves is just how sustainable are the dividend streams?

In this article we analyse four of the highest-yielding trusts, with a diverse mix of income generation, from European real estate and specialist lending to solar assets and Far Eastern stocks.

WINNING FORMULA

The highest-yielding trust on our screen, Schroder European REIT (SERE)…

SECURED INCOME

Alternative finance firm VPC Specialty Lending (VSL)…

EASTERN PROMISE

Henderson Far East Income (HFEL)…

BRIGHT FUTURE

..One of the largest UK-listed funds is NextEnergy Solar (NESF) which owns a portfolio of 100 solar assets…

According to the NextEnergy Solar, the levelised cost of energy for solar has declined by 90% in the past 10 years making it the cost leader over other power technologies.

However, industry body Solar Energy says for the UK government to hit its net zero target by 2050 it will need to triple solar capacity by the end of this decade…

As the leading operator in terms of assets, that puts NextEnergy Solar in prime position to benefit from this expansion…

The target dividend for the full year is 7.52p, which at a price of 118.2p means the shares are trading on a 6.4% yield, well above the market average.

‘This will mark eight years of consecutive dividend increases from NextEnergy Solar,’ said James Carthew, co-founder of research group QuotedData, in April. ‘Since launch, it has paid out over £250 million in dividends. Each year, these have been covered by earnings and the statement says that the company is aiming to maintain that record.’

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