The advantages of reinvesting dividends from a total return point of view are well documented, but many investors hold a yield-paying fund purely to achieve an income stream on a monthly, quarterly, biannual or annual basis. Such investors would have been greatly rewarded by holding this £72m portfolio, which is currently headed up by FE Alpha Manager Ariel Bezalel (pictured) and Richard Curling.
A £1,000 investment in the fund a decade ago would have generated £1,467.98 in dividends alone. This is £624.13 more than M&G Extra Income, which came in second place.
As the name of the Jupiter fund suggests, income is paid out monthly to investors.
Income-earnings of funds over 10yrs
Source: FE Analytics
Jupiter Monthly Income sits in the IMA UK Equity & Bond sector. Its equity-to-bond ratio is currently 80/20.
Like Henderson UK Strategic Income, which was recently highlighted as the best income-paying UK Equity Income fund of the last decade, the Jupiter portfolio invests predominantly in investment trusts.
Among the managers’ biggest holdings are the Schroder Oriental Income and Henderson High Income trusts.
Bezalel and Curling were only appointed in the last couple of years, replacing Laurie Petar, who headed up the fund for 10 years between 2000 and 2010.
The five crown-rated fund is currently yielding 4.6 per cent. It requires a minimum investment of £500 and has a total expense ratio (TER) of 1.73 per cent.
The study looked at funds in the IMA Flexible Investment, Mixed Investment 40-85% Shares, Mixed Investment 20-60% Shares, Mixed Investment 0-35% Shares, Absolute Return and UK Equity & Bond sectors.
Five of the top-10 sit in the IMA UK Equity & Bond sector, which tends to be overlooked by many UK investors.
Top-20 income-paying funds over 10yrs with initial £1,000 investment
| Name | Income paid (£) | Current yield (%) |
|---|---|---|
| Jupiter Monthly Income | 1,467.98 | 4.6 |
| M&G Extra Income | 843.85 | 4.33 |
| CIS UK Income With Growth | 735.43 | 4.2 |
| Investec Diversified Income | 726.66 | 5.32 |
| Insight Diversified High Income | 690.59 | 6.26 |
| CF Miton Distribution | 687.29 | 5.64 |
| Jupiter High Income | 685.99 | 4.5 |
| Marlborough Extra Income | 678.09 | 4.87 |
| Consistent Practical | 674.55 | 3.68 |
| CF Canlife UK Equity and Bond Income | 670.57 | 5.09 |
| F&C High Income | 659.55 | 4.9 |
| Ecclesiastical Higher Income | 638.19 | 4.23 |
| Insight Monthly Income | 637.92 | 3.58 |
| Threadneedle Monthly Extra Income | 637.54 | 3.8 |
| Premier Multi-Asset Distribution | 636.92 | 4.44 |
| Scottish Widows High Reserve | 599.43 | 3.9 |
| Threadneedle Managed Income | 592.11 | 4.13 |
| Fidelity Moneybuilder Balanced | 587.81 | 4.03 |
| HSBC Monthly Income | 580.84 | 4.14 |
| Architas Active Intermediate Income | 568.55 | 3.37 |
Source: FE Analytics
M&G Extra Income, headed up by Richard Hughes, is a long way back in second, with £843.85 worth of payouts over the decade. It distributes income quarterly and is currently on a yield of 4.33 per cent.
Of those funds that do not sit in the IMA UK Equity & Bond sector, Investec Diversified Income has the best record. Headed up by John Stopford, the £75m portfolio has delivered £726.66 in dividends from an initial £1,000 investment over the last 10 years.
Insight Diversified High Income has the highest current yield of any fund on the list, at 6.26 per cent.
Unsurprisingly, all 20 funds in the table have a specific income focus. The majority, including Jupiter Monthly Income, put a greater emphasis on generating a high yield than on capital growth.
However, while a recent FE Trustnet study revealed that high-yielding funds in the UK Equity Income sector tend to underperform, many of these income-focused multi-asset portfolios are also sector leaders when it comes to total returns.
In the UK Equity & Bond sector, Jupiter Monthly Income, CIS UK Income With Growth, Jupiter High Income and Threadneedle Monthly Extra Income are all top-quartile performers over the last decade.
The best performer of these is Jupiter Monthly Income. It has delivered 234.88 per cent over the last 10 years, more than doubling the returns of its sector average.
Performance of fund vs sector over 10yrs
Source: FE Analytics
Threadneedle Monthly Extra Income is perhaps the most consistent of the four – it has delivered top-quartile returns over one, three, five and 10 years. Ecclesiastical Higher Income and Consistent Practical have achieved the same feat in the IMA Mixed Investment 40-85% Shares sector.
Investec Diversified Income is a top performer in its IMA Mixed Investment 20-60% Shares sector over the last decade, with returns of 146.3 per cent.
Some investors may be surprised not to see Jupiter Merlin Income on the list. The £4.5bn fund, headed up by FE Alpha Manager John Chatfeild-Roberts’ highly rated team, came in at 21st.
It has delivered £564.64 in dividends from an initial £1,000 investment over 10 years.