Recently Square Mile updated their income graphs to reflect the distributions paid out by funds in 2016 on our website. Square Mile shows income graphs for every Square Mile rated fund that has an income outcome and where our data provider FE can provide us with three full calendar years of distributions for the appropriate share class.
When considering a fund from an income perspective, most investors will consider the fund’s yield. A fund’s yield is calculated as the distribution per share over a given period divided by the share price at the start of the period considered. This is a useful measure for investors and shows how much income an investor could potentially receive. However, what it does not show is whether the fund’s distributions have risen or fallen over time. Many funds have provided a constant yield over time, but the income that an investor would have actually received has varied. As you can see from the graph below, the example fund has provided a fairly constant yield, but the actual monetary income which investors have received has fluctuated. The moral of the story is that constant yield does not equal constant income.
The above graph shows the distributions per share for an example fund. However, given that we do not know the fund’s price, we have no perspective of whether a distribution of six pence per share is good, bad or middling. By assuming that we invest £1000 on a given date, we can gain a greater understanding of how much income we are receiving on our investment.
Following the 2016 update, Square Mile have observed the following:
• If you had invested in the Trojan Income fund on 31st December 2005, your distributions would have increased every calendar year since.
• The distributions from the L&G All Stocks Gilt Index Trust have fallen every calendar year since 2001. This is not a reflection of the fund’s inability to appropriately track its FTSE Actuaries British Government All Stocks Index benchmark, but more a nature of the falling distributions from government bonds over this time.
• If you had invested £1000 in each of the Fidelity Enhanced Income and the Schroder Income Maximiser funds on the 31st December 2013, you would have received £193 and £71 of income respectively; this is nearly 20% of your original investments.
• In 2016 alone the income paid out by the Invesco Perpetual Tactical Bond Fund, Saracen Global Income & Growth Fund and the Schroder Multi Manager Diversity Income Fund have all grown by more than 50%.
• The most consistent growth in income over the last four years has come from the UK Equity Income sector, with the Evenlode Income Fund, Royal London UK Equity Income Fund, Threadneedle UK Equity Income Fund and Trojan Income Fund all growing their distributions every year for the last four years.
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