Studies show that dividends paid out and reinvested are the key to long-term stock market total returns, but should you invest for income, growth or a mix of the two?
‘It’s not just about high yield, it’s about owning companies with dividends that we think can steadily grow into the future’, says Troy Income & Growth co-manager Hugo Ure.
This style of investing can deliver both a decent and solid income and companies that can see their share price rise over time, he argues.
Troy Income and Growth predominantly invests in UK companies and currently yields 3.2 per cent – below the market’s 4 per cent – but has grown its annual payout by 5 per cent on average over the past five years.
On this episode of the Investing Show, Hugo discusses how he looks for the best income and growth opportunities, how to avoid value traps when weighing up high yield stocks and some of the companies he thinks can produce robust and growing dividends in years to come.
Among the trust’s top ten holdings are some familiar big gun names, including Unilever, Lloyds and Shell, but Hugo also talks us through some of the lesser-known names, such as Sabre Insurance, which insurers non-standard drivers and operates in a niche in which it can continue to grow.
Troy Income and Growth trust has ongoing charges of 0.91 per cent and a total return of 43.7 per cent over the past five years, well ahead of the AIC’s average UK Equity Income trust’s 33.2 per cent, but only just in front of Vanguard’s UK All Share index tracker’s 42.95 per cent.