- Investment companies show income benchmarks
- Miners still perform well for dividends
At the height of the pandemic, when many companies cut dividends paid to shareholders, investment firms stood out by protecting their payments. It’s controversial because it means paying dividends on capital. This aspect of so-called reserve management has the opportunity cost of decreasing the powder stores that investment firms have to fill to supplement their holdings and this means missing out on longer-term compound total returns.
Yet for many investors who depend on income from equities, the commitment of investment firms to return cash has been a boon. Additionally, a counter-argument to dividend reduction is that if investment firms had taken this route, their stock prices would have fallen further, potentially widening the discount to net asset value (NAV). ) at an uncomfortable level for managers and shareholders.
Today, many investment firms still perform very well on our Alpha Dividend Yield screens. Although the pandemic is far from over, they remain very good fund structures to play the potential recovery, with the kicker of a dividend.
Impact Healthcare Reit (IHR), a real estate investment firm focused on nursing homes and nursing homes, tops our FTSE All Share screen. Pension funds must pay out 90% of their rental profits as income, and IHR offers a return of over 5% according to our FactSet data. The income is attractive, but on a valuation front, potential investors might want to consider that the premium at which its stock trades to the net asset value has widened again in the past two months.