7
Dividend heroes
Courtesy of their closed-end structure, another attractive feature of an investment trust is its ability to retain up to 15% of dividends and income received from holdings in the underlying portfolio in any one year. Unit trusts and OEICs cannot do this. This allows trusts to accumulate a cash reserve which can then be used to ensure that the income it pays to shareholders by way of its own dividend continues to grow over time, even when markets are volatile. This makes them attractive to investors seeking income.
The mechanics
These dividends are paid regularly – usually semi-annually or quarterly. Low yielding trusts may only make an annual distribution, whereas some higher yielding ones pay dividends monthly. Trusts occasionally ...
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