Focus on dividends – high yields can still be found, if you know where to look

There are not many funds yielding more than 10% currently, but for the investor who is able to tolerate a heterogeneous set of underlying assets then it is a feasible option.

UK venture capital trusts, global bonds and property by the Black Sea all serve up yields in excess of 25%, according to FE data.

The Downing Planned Exit VCT 3 plc , located in the UK Assocation of Investment Companies’ VCT Generalist sector, offers a yield of 98%, which compares extremely well against its benchmark, the FTSE All Share Total Return.

The Bermuda-based HSBC Fof Bond fund delivers a 65% yield, while the UK domiciled Black Sea Property investment trust (closed ended) fund is making investors some 53% in yield.

What is worth noting, of course, is that these yields determine a ratio between the price of the security and the dividends paid. And it is also the case that many of these higher yielding funds are very volatile, and that yields are sometimes high precisely because the price of shares has fallen so far.

So what might be some lower volatility, yet higher yielding, shares?

Filtering for funds that have yield above 10%, but with an annualised volatility of less than 15% over a three year period, throws up a number of names (listed below), which range from a low volatility score of 1.79% up to 14.94%.

The yield ratios vary considerably more, however, from around 10% up to 65%.

Among the better performers on this basis includes the aforementioned HSBC Fof Bond fund.

The UK domiciled Ingenious Ventures Ingenious Entertainment VCT 2 is another, with a 25% yield against annualised volatility risk of about 13%.

The South Africa domiciled IS Dibanisa Absolute Return is another. Looking into its holdings gives a clue to how this is done; the fund is heavily weighted to financials and basic materials – both the type of stock which in recent months has seen share prices pressured, even as cashflow and margins of banks and mining companies have continued to be relatively solid.

 

 Fund Yield % Ann. Volatility
LSE Fixed Interest – Ex.12% 13/17 12% Exchequer Stk 13/17 – Mar 82 (01MU) 10.25 1.79
HSBC – FoF Bond – May 03 (AQ96) 65 4.75
GAM – High Yield – Aug 87 (GL89) 11.06 5.83
IS – Dibanisa Absolute Return – Aug 05 (B2T6) 18.75 6.06
Octopus Investments Limited – Octopus Eclipse VCT – May 06 (I049) 14.81 6.34
ISIS Equity Partners – Baronsmead VCT plc – Nov 95 (IM14) 12.19 7.59
Skandia – Specialist High Yield Bond – Jan 05 (YC93) 10.26 7.7
LSE Equities – Celtic 6% Cvpf. 6% Cnv Cum Prf 60p – Sep 95 (01OL) 15.38 8
LSE Equities – Private&comm.8% 8% Cnv Uns Ln Nts 2013 – Jul 03 (022M) 12.31 8.36
BNY Mellon – Global High Yield Bond – Feb 04 (ZQ95) 10.8 8.69
Ingenious Ventures – Ingenious Entertainment VCT 2 – Nov 08 (BPV1) 28.57 12.54
Glacier – International Multi-Currency – Apr 04 (B3B1) 10.99 12.8
Premier – European Optimum Income – Apr 99 (BD03) 11.47 13.46
Marlborough – High Yield Fixed Interest – Dec 04 (QM64) 10.09 14.66
Harewood – US High Income – Oct 06 (FZY4) 19.48 14.94

 

 

 

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