COVER STORY
Grow your own way
It is possible to obtain an income from some of the highest-growth areas of the market if your exposure is through investment trusts that pay a dividend out of capital .
The International Biotechnology Trust is one such example . Most companies in the sector reinvest cashflows into new projects or acquire other smaller biotechnology companies rather than pay out a dividend . However , it has a yield of 4 %, which it pays from capital , or cash if one of its holdings is bought out .
The
Invesco UK Equity Share Portfolio uses similar tactics . It aims to deliver a real total return with a growing income , and can supplement the dividends from its underlying holdings with capital from its reserves .
Manager Ciaran Mallon says : “ This gives us the flexibility to seek the right mix of income and capital growth . This helps ensure each company in the portfolio has the right dividend policy for its circumstances .” expertise of the investor base , and access to a deep pool of liquidity mean that many are attracted to London ,” he adds .
Out of the Windows The relative immaturity of tech stocks means they are always thought of as growth investments . But could they one day be a fruitful source of income , rivalling the likes of oil & gas and banking stocks for dividends ? Technology stocks normally eschew dividends in favour of reinvesting cashflows , gearing their fortunes to their ability to drive productivity , creating a positive feedback loop that allows them to compound gains . This is especially important when they enter a new market , where firstmover advantage is key and winnertakes-all economics often apply . Yet once they mature , it appears there is nothing to stop them rewarding shareholders with a payout . Microsoft – which with a market cap of $ 2.3trn is bigger than the FTSE 100 – started paying dividends in 2003 and has increased them in every year since . This encompasses a period of nearly 10
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