Seven of the top-10 sit in the IMA Sterling High Yield sector, while two sit in IMA Global Bonds. Only one – Invesco Perpetual Monthly Income Plus – is a constituent of the Strategic Bond sector.
Income-earnings of funds over 10yrs
Source: FE Analytics
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.
The best bond fund for dividends over 10 years overall is Invesco Emerging Markets Bond, which has paid out £1,216.03 on an initial £1,000 investment.
The $571m portfolio, which is headed up by Claudia Calich, requires a minimum investment of $1,500 and has a total expense ratio (TER) of 1.28 per cent. It pays out dividends once a year.
In spite of the fund’s stellar income record, its current yield of 4.34 per cent is the second-lowest on the list.
The duo of Paul Causer and Paul Read are the only managers who head up more than one fund on the list.
Their Invesco Perpetual Monthly Income Plus and European High Yield funds have delivered £1,031.32 and £835.97 in dividends over 10 years on an initial £1,000 investment, respectively.
Four of the funds on the list have a monthly-dividend policy, including Threadneedle High Yield Bond and Kames High Yield Bond. The former is the highest yielder on the list, at 7.4 per cent. Barrie Whitman has headed it up since 1999.
Top-10 income-paying funds over 10yrs with initial £1,000 investment
| Name | Income earned (£) | Current yield (%) |
|---|---|---|
| Invesco Emerging Markets Bond | 1,216.03 | 4.34 |
| Investec Global Strategic Income | 1,134.81 | 3.85 |
| Invesco Perp Monthly Income Plus | 1,031.32 | 6.07 |
| Threadneedle High Yield Bond | 929.90 | 7.4 |
| Ignis High Income Bond | 876.18 | 5.3 |
| Baillie Gifford High Yield Bond | 871.90 | 5.3 |
| Investec Monthly High Income | 858.89 | 6.99 |
| Stan Life Inv Higher Income | 845.64 | 6.07 |
| Kames High Yield Bond | 838.62 | 5.09 |
| Invesco Perp European High Yield | 835.97 | 4.92 |
Source: FE Analytics
No funds in the IMA Sterling Corporate Bond sector came anywhere near the top-10 list. BlackRock Corporate Bond was closest, with payouts totalling £594.29.
On average, the top dividend-paying bond funds have delivered more in income than those in IMA UK Equity Income or the five IMA multi-asset sectors.
In previous FE Trustnet studies, Henderson UK Strategic Income and Jupiter Monthly Income were both shown to have returned more than £1,000 in dividends on an initial £1,000 investment over the last decade, but very few others have managed more than £800.
As well as performing strongly in terms of income, most of the funds on the list have a strong total return record.
Invesco Emerging Markets Bond and Investec Global Strategic Income are both top-quartile performers in their IMA Global Bonds sector over 10 years. The Invesco fund is also in the top 25 per cent of the sector over one, three and five years.
Invesco Perpetual Monthly Income Plus is perhaps the most consistent fund of the last decade in the entire IMA Strategic Bond sector. It is a top-quartile performer over one, three, five and 10 years, although it has been more volatile over all of these periods.
Performance of fund vs sector over 10yrs
Source: FE Analytics
Invesco Perpetual Monthly Income Plus requires a minimum investment of £500 and has a TER of 1.44 per cent. Causer and Read co-manage the portfolio with star manager Neil Woodford.
All but Ignis High Income Bond, Standard Life Higher Income and Investec Monthly High Income are top quartile in their respective sectors over 10 years.