Which investment trusts pay the highest yields?

Investment trusts in specialist sectors pay the highest yields in the AIC universe, with commodities and natural resources companies paying the most.

According to research from the Association of Investment Companies (AIC), of the 51 member companies that pay a dividend yield in excess of 5%, 33 (64.7%) are from specialist sectors.

Most prominent are trusts from the debt, infrastructure, property and commodities and natural resources sectors. DRC Capital's Duet Real Estate Finance tops the list of high-paying trusts, with an annual dividend yield of 14.5%. The trust has delivered a total return of over 87% in the three years to 17 March.

Interestingly, three of the five highest-yielding investment trusts sit within the AIC's commodities and natural resources sector, which pays an average yield of 7% - the highest of any AIC sector.

Commodity yields

These are New City Energy, which pays the second highest yield of any investment trust at 10.3%, El Oro (7.4%) and BlackRock World Mining (7.1%).

In large part that is a reflection of the fact that over the past three years to 17 March, the average commodities and natural resources trust has shed an average of 62% in share price terms (boosting income payouts as a proportion of share price), as oil and other commodities have fallen sharply in price.

Infrastructure trusts are also top payers, with renewable energy infrastructure companies paying some of the most attractive dividends in the sector. The Bluefield Solar Income Fund (BSIF) is the 10th highest-paying investment trust with a 6.6% yield, followed by the Foresight Solar Fund (FSFL) and Renewables Infrastructure Group, both of which pay 5.9%.

Commenting on the attraction of infrastructure trusts, Stephen Ellis, manager of GCP Infrastructure, says: "Infrastructure investment quite rightly attracts investors seeking long-term, reliable income, yet it is only recently that a wider case has been made for infrastructure as a core investment class.

"Infrastructure assets are typically expensive, so need to be capable of generating a predictable, long-term cash flow in order to justify the initial expenditure. Moreover, because the assets are important to society they will often have explicit or implicit governmental support."

Property trusts

Property trusts also feature among the top payers, including healthcare property specialist MedicX, which yields 7%, followed by Japan Residential (6.4%), Empiric Student Property (ESP) (5.8%), and Standard Life Investments Property Income (5.4%).

In comparison to the above trusts and sectors, the average UK equity income trust pays 3.5% a year, while the average global equity income company yields slightly more at 4.3%.

However, most of these high-paying vehicles are in what many consider to be far riskier sectors, hence the need for enticing yields.

As mentioned, commodities and natural resources have plunged in price, and the AIC's debt sector is also volatile, shedding an average of 4.6% over five years and gaining 5.6% over three years.

Infrastructure, including renewable energy infrastructure, is comparatively stable, delivering strong positive returns over one, three and five years.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.