Alternative finance funds beat the sector average for dividend yield
ALTERNATIVE finance-focused investment trusts are paying above the average in the Association of Investment Companies’ (AIC) debt sector, with some providing investors with returns of up to eight per cent.
In comparison, the average yield in the AIC debt sector is 6.6 per cent.
A dividend yield provides investors with an indication of the level of income they may get from an investment company share, although this can change depending on the fund’s performance.
Using dividend yield figures from the AIC, based on the annual dividends paid as a percentage of the share price as of 10 March, research shows most alternative finance-focused funds have increased their dividends over time.
VPC Specialty Lending
Launched in March 2015 by US hedge fund Victory Park Capital, VPC Specialty Lending currently has the highest dividend yield among its peers at 7.8 per cent based on a share price of 76.5p.
The investment company, which has backing from fund veteran Neil Woodford, has paid seven dividends since launch in August 2015.
The most recent was this month at 1.5p per share, which is up from 0.9p when it paid its first dividend in August 2015.
Ranger Direct Lending
US-focused Ranger Direct Lending is currently offering a dividend yield of 9.1 per cent off a share price of 1,059p.
The fund, which recently reported a twentieth consecutive month of positive returns, focuses on platforms providing secured finance to businesses, mainly in the US, helping it avoid economic issues regarding Brexit in Europe and the UK.
It has made eight dividend payments since launch in May 2015, with the most recent this month at 28.5p, up from its first payment of 8.3p in November 2015.
P2P Global Investments
The first-ever fund to focus on the P2P sector, P2P Global Investments has a current dividend yield of 5.4 per cent based on the share price of 786.5p.
The fund, which has been shifting towards asset-backed investments, includes lenders such as Zopa, Funding Circle and Lending Club in its portfolio.
It has paid 11 dividends since launch in May 2014, with the most recent coming in February at 11p per share.
Its dividend has increased from 6p per share in November 2014.
SME Loan Fund
The SME Loan Fund, set up by GLI Finance in 2015, invests in alternative finance businesses, predominantly in the UK, including P2P platforms such as Proplend and UK Bond Network.
It is on a dividend yield of 7.6 per cent based on a share price of 94.2p.
The fund has paid 16 dividends since December 2015, all hovering around 0.6p.
GLI Finance has proposed changes to the fund that would see it dispose of its holding in the trust, currently valued at £22.7m.
If approved, the changes would see Amberton Asset management, which is 50 per cent owned by GLI Finance, replaced as investment manager by SQN Capital Management.
It all forms part of GLI’s ongoing strategic review.
This was prompted after the company posted a £6.9m loss for the first half of 2016, compared with profit of 5.3m, blamed on the overspending of former chief executive Geoff Miller.
Funding Circle SME Income Fund
Launched in November 2015, this investment trust backs loans on the Funding Circle platform.
It has paid three dividends since launch in November 2015, most recently at 1.625 in December 2016, which was level with same amount in September 2016 and above the 1p per share issued in June 2016.
This has provided a dividend yield of 5.9 per cent based on a share price of 101.63p.
The fund is currently planning to issue more shares to help it grow and meet market demands.
Honeycomb Investment Trust
Launched in December 2015, Honeycomb invests in UK loans to consumers and small businesses, mainly originated by Honeycomb Finance.
It has a dividend yield of 6.3 per cent, based on a share price of 1,095p.
The fund has paid four dividends since launch, the most recent was 23.5p per share earlier this month, up from its first payment of 2.1p in May 2016.
