It’s not a completely free lunch. Setting up a share portfolio and filling it with income stocks requires effort at the beginning. But after that, it’s possible to sit back and watch the dividends roll in. I’ve been doing it for years.

Want a quick way to start earning passive income with just £9,999? Here are three steps that could give you a large and reliable dividend stream not just for summer, but for life.

1. Take the ISA route

Building a second income doesn’t just come down to what shares you buy. It also depends on how you invest in those dividend stocks.

What I’m talking about is trading the stock market in a tax-efficient Stocks and Shares ISA. The benefit? Not a single penny is taken from your passive income by HMRC.

With a £9,999 lump sum invested in 7%-yielding shares, you’d receive just under £700 in dividends. Now let’s say you’re a higher-rate taxpayer. After taxes, you’ll have only £632 in your pocket. That difference will likely compound significantly over time as your portfolio grows, too.

With protection from capital gains tax, too, using a Stocks and Shares ISA is a no brainer in my view.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

2. High-yield opportunities

Roughly 60% of shares on London’s stock market pay dividends today. A great many of these pay dividends at mid-to-high single digit percentages, too. Selecting these can make a noticeable difference to your passive income.

If you were to invest your £9,999 ISA in a FTSE 100-tracking fund, you’d generate a second income of just £310, give or take a few pence. That’s based on the blue-chip index’s current yield of 3.1%. And it’s much less than you’d make with 7%-yielding shares in our example above.

Here’s the thing, though. Some companies with higher dividend yields can find it hard to sustain these market-beating payouts. But investors can get around this with a simple trick…

3. Diversifying for a second income

Holding a variety of shares reduces the risk of any one company cutting dividends and damaging your income stream. This can be achieved easily with investment trusts like Henderson Far East Income (LSE:HFEL).

These vehicles pool investors’ cash across hundreds of companies at a stroke. This particular one holds 68 different shares across many industries. Its dividend yield today is an enormous 9.6%.

That might look unsustainable at first. You may also think the trust’s focus on just Asian equities leaves payouts vulnerable in the event of a downturn, too. They’re fair comments, but the trust’s record — it’s raised dividends for 18 straight years — suggests more resilience than meets the eye.

For this reason, I think investing £9,999 here for a second income is something to consider. But bear in mind you can also achieve excellent diversification by building your own portfolio of dividend shares.

What income stock do we like better than Henderson Far East Income right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Royston Wild does not hold any positions in the companies mentioned.

The post How can you earn a second income with £9,999 this summer? appeared first on The Twelfth Magpie.

For example, one investment trust in the index already pays quarterly dividends that add up to a 9.6% yield. On top of that, it has been growing its dividend per share annually for the past few years.

A diversified portfolio with high-growth opportunities

The FTSE 250 stock in question is Henderson Far East Income (LSE: HFEL). As the name suggests, the investment trust is focused on the Asia-Pacific region.

That gives it possible exposure to plenty of opportunities that have strong growth stories. Indeed all three of the trust’s current largest holdings (MediaTek, Taiwan Semiconductor Manufacturing and SK Hynix) operate in the semiconductor space, currently booming on the back of AI demand.

Buying growth shares then selling them for a higher price down the line could be one way to fund dividends. Typically though, growth shares are not associated with high yields.

However, growth shares are not the only string to Henderson Far East Income’s bow. It also owns some lucrative dividend shares, like 5.7%-yielding Swire Properties.

This share’s cheaper than it was five years ago!

Despite steady dividend growth and a notably high yield, Henderson Far East Income’s share price has actually fallen 19% over the past five years.

More encouragingly, recent performance has been decent. The FTSE 250 stock is up 15% over the past year, outpacing the 9% seen in the index during that time.

Still, does the long-term value destruction indicate possible investor concerns about the sustainability of the bumper dividend?

Just because a company has had a steady history of regularly raising dividends does not mean it will keep doing so.

Just look at Guinness brewer Diageo as an example. Until several years ago, it had grown its dividend annually for decades. This year though, it sliced it in half.

I see long-term potential here

I certainly see risks for Henderson Far East Income.

Its heavy exposure to the semiconductor industry is one, if the bottom falls out of that heated market. On the plus side, as recent performance shows, it is an opportunity as well as a risk.

Weakening economic indicators in some large Asian economies suggest another risk. Any economic slowdown could eat into the prices of the shares in the trust’s portfolio — and also the ability of companies it has invested in to pay large dividends.

Yet stepping back to the bigger, long-term picture, I am upbeat about this high-yield FTSE 250 stock’s ongoing potential.

I continue to see Asia Pacific as having good long-term growth prospects and reckon Henderson Far East Income stands to benefit from that given its portfolio allocation.

For investors who are focused on trying to earn regular passive income streams from their share portfolio, I see it as a stock worth considering.

What income stock do we like better than Henderson Far East Income right now?

One of our Share Advisor analysts has just released a brand new stock report that we think is a must-read for any investor looking to try and generate potential income.

And the best bit is that you can see if for yourself, right now, absolutely free of charge!

No jargon. No hard sell. Just a clear look at an income share we think is worth your time.

Christopher Ruane owns shares in Diageo.

The post This FTSE 250 stock yields 9.6% — and has actually been growing its dividend appeared first on The Twelfth Magpie.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

There are some really high-yielding stocks on the FTSE 100 and FTSE 250 today, paying income of more than 7%, 8%, or 9% a year. An income-seeking investor with £2,000 at their disposal might consider spltting it between these two.

Legal & General Group

The first is a stock I own, FTSE 100 insurer and asset manager Legal & General Group (LSE: LGEN). This offers the highest yield on the blue-chip index at 7.7%, and the board’s committed to increasing shareholder payouts by 2% a year. It’s also rewarding investors with its biggest share buyback ever, worth £1.2bn.

Legal & General’s one of the most popular stocks in the UK, but does have one big disadvantage: its shares have underperformed for some years. In fact, they’re trading at similar levels to a decade ago. So while investors have got lots of income, the growth hasn’t been up to much. But it’s shown signs of life lately, and it’s up 12% in the last year.

Legal & General’s board is working hard to streamline the business, and give it more focus, but it still has some way to go. Profit growth has been sluggish lately and ultimately, that drives the share price. As an asset manager, it’s vulnerable to wider stock market volatility. But that high yield looks secure, and it’s worth considering as a result.

I think the shares should swing back into favour at some point but, for now, treat any share price growth as a bonus.

Henderson Far East Income

Fancy an even bigger that yield? Then you might be interested in FTSE 250 investment trust Henderson Far East Income (LSE: HFEL).

The trust aims to generate a steadily rising annual dividend plus capital appreciation from a diversified portfolio of investments from the Asia Pacific region. Today, the trailing yield’s an absolutely stunning 9%. Better still, it has an impressive record of increasing shareholder payouts. It’s done so every year this millennium.

Again, the share price has disappointed. That’s often in the case with high-yielding stocks, where the dividend grows but the shares stagnate. 

The shares are down 15% over five years, amid wider emerging market underperformance. But the sector has swung back into favour lately, and Henderson Far East Income share price is up 25% in the last 12 months. 

Emerging markets have been boosted by the weaker US dollar, which reduces the cost of servicing their debt burdens, and the recent tech sell-off. They could slow if those trends go into reverse.

While the trust’s performance may remain bumpy, history suggests the income should be solid. Unfortunately, it’s a little expensive trading at a premium of 5.7% to underlying net asset value. 

Somebody who split their £2k between this two would get a stunning yield of around 8.35%. That £2k should generate income of £167 in the first year. Worth considering, just understand the risks.

Should you invest £5,000 in Legal & General Group Plc right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Legal & General Group Plc made the list?

Harvey Jones owns shares in Legal & General Group.

The post Here’s how to invest £2,000 in a Stocks and Shares ISA for an 8% dividend yield appeared first on The Twelfth Magpie.

Two trusts in particular have caught my eye lately. Each owns a robust portfolio of market-leading companies with strong balance sheets, making them perfect for dividend chasers. And their dividend yields sail past the FTSE 100 average of 3% to 4%.

These are:

• Henderson Far East Income (LSE:HFEL) — 9% dividend yield.
• Schroder Real Estate Investment Trust (LSE:SREI) — 7.8% dividend yield.

Here’s what makes them excellent UK-listed income stocks to consider.

Look East

Henderson Far East Income is designed to provide

a growing total annual dividend per share, as well as capital appreciation, from a diversified portfolio of investments from the Asia Pacific region.

This focus on fast-growing regions means a huge dividend yield and steady payout increases. Indeed, dividends here have risen every year since the early 2000s. But that’s not all, as — like other emerging market stocks and trusts — it has also enjoyed stunning share price gains. It’s risen 25% in value over the last year.

It’s important to note the share price performance of Henderson’s trust has been bumpier over a longer timescale. This could remain so, like other Asia-focused investments. But as China’s economy picks up steam again and buoys the broader continent, I’m optimistic the trust can keep outperforming.

In total, Henderson Far East Income holds shares in 72 companies, providing particularly strong exposure to financial services and information technology.

A top REIT?

Schroder Real Estate Investment Trust isn’t designed to hold a portfolio of income-paying stocks. Instead, its goal is to deliver

an attractive level of income and the potential for income and capital growth from owning and actively managing a diversified portfolio of UK commercial real estate

Its official status as real estate investment trust (REIT) has large positive implications for dividend investors. These companies receive juicy tax breaks. And in return, at least 90% of yearly profits from their rental operations must be paid to shareholders.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

Here’s the thing, though. This alone doesn’t guarantee a large and reliable dividend income. With exposure to cyclical sectors like offices, retail and industrial, could the trust’s rent collection and occupancy suffer during downturns? It’s possible.

However, its large portfolio of 33 properties significantly cut the risk of such disruptions. It also enjoys an average lease term of over five years, giving it further solid earnings visibility.

A £1,680 income opportunity?

The average dividend yield on Henderson Far East Income and Schroder Real Estate Investment Trust is 8.4%. At this level, a £20,000 investment spread equally across them will deliver a £1,680 passive income just for 2026. I think both demand serious consideration.

Should you invest £5,000 in Henderson Far East Income right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Henderson Far East Income made the list?

Royston Wild does not hold any positions in the companies mentioned.

The post An 8.4% average yield from passive income stocks? Consider these top investment trusts in July appeared first on The Twelfth Magpie.

A quick rundown

Schroder European Real Estate Investment Trust has a yield of 8.51%, with the stock down 11% in the last year. It benefits from a long history of payouts and its focus on property income. As a real estate investment trust (REIT), it enjoys tax advantages and long-term leases that can provide relatively predictable cash flow. I also like it because it has zero UK exposure, so this helps to diversify the rest of a UK-focused income portfolio. The risk is that higher borrowing costs can squeeze profits and make it look less appealing.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice.

Sequoia Economic Infrastructure Income is designed around lending money to infrastructure-related projects, earning income from a portfolio of private loans and bonds. With its dividend yield sitting at 8.17%, the share price is also up 4% in the last year. The risk is that if borrowers struggle, defaults rise, putting the fund under pressure.

Octopus Renewables Infrastructure Trust boasts a yield of 9.79%, but is down 14% in the past year. It takes a different approach by owning renewable energy assets such as wind and solar projects. Beyond the income angle, the investment case (as I see it) is built around long-term demand for cleaner energy and the potential for steady cash flows from operating assets. One concern investors might have is that a lot of cash gets tied up in projects, which isn’t great if it needs a large amount of money quickly.

Looking further abroad

As a fourth option, Henderson Far East Income (LSE:HFEL) could be considered. As the name suggests, it aims to deliver a high and growing income stream by investing across Asia-Pacific equities.

Things are clearly working well, with the stock up 22% in the past year while also having a 9.02% yield. The trust invests heavily in sectors like finance, telecoms, and real estate, where cash generation is relatively strong. Income is generated from the dividends paid by these underlying holdings, and capital gains can also contribute when holdings appreciate. It also has some tech exposure, which has helped lift the fund overall recently.

The dividend looks sustainable because the portfolio is built specifically around income resilience rather than aggressive growth. Many holdings have strong balance sheets and established dividend policies, particularly large Asian corporates and state-linked firms. On top of that, the trust maintains revenue reserves that act as a buffer during weaker years, helping it smooth payouts even when underlying income fluctuates.

One risk is currency fluctuations, as the fund constantly has to deal with multiple different currencies outside of the British pound. Geopolitical tensions with China, Taiwan and other Asian nations are another concern. Yet even with this, I still think it’s a good stock for investors to think about.

Should you invest £5,000 in Henderson Far East Income right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Henderson Far East Income made the list?

Jon Smith has no positions in the shares mentioned.

The post 4 income stocks with yields above 8% appeared first on The Twelfth Magpie.

• Strong cash flows and little-to-no debt.
• Sector-leading positions, reflecting competitive advantages and high barriers to entry.
• Diversified revenue streams that protect profits from localised shocks.
• Histories of sensible capital allocation, including prudent payout ratios.
• Capital-light business models that require minimal investment.

I’ve recently bought more Aviva and Primary Health Properties shares for my portfolio to boost my income streams. The forward dividend yields for these shares sit at 6.7% and 7.8% respectively, ahead of the FTSE 100 long-term average of 3%-4%.

And I’m considering opening positions in Henderson Far East Income (LSE:HFEL) and Standard Life (LSE:SDLF) in the coming days. The dividend yields among these top income shares are even higher for 2026, at 9.5% and 8.4%.

Why should investors think about buying these shares? If dividend forecasts are correct, a £20,000 ISA investment spread equally across them will generate £1,680 in dividends this year alone.

Let’s look in more detail why they’re on my shopping list in June.

Look East

Henderson Far East Income, as its name implies, focuses on generating dividends from Asian businesses. The result? This investment trust enjoys exposure to some of the hottest dividend shares on the planet.

According to analysts at Edison:

Asian companies are generating record levels of cash, helped by having low levels of debt, strong free cash flow and low capex… Payout ratios have [also] been rising in Asia and the region is home to some of the highest dividend growth businesses.

As a consequence, Henderson Far East Income’s dividends have risen for 18 years on the spin. But that’s not all. Like all investment trusts, it’s been able to hold back cash during stronger years. This has helped it keep paying large and growing dividends even during leaner times for its holdings. Today, the trust owns shares in 74 different companies.

A FTSE 100 income opportunity?

Standard Life has never cut dividends since it listed on London’s stock market in 2009. It’s also raised dividends every year for the past 10 years. What’s its secret?

The answer’s simple. Standard Life buys mature life insurance and pension portfolios that generate reliable long-term cash flows. This model has another advantage: it doesn’t require huge amounts of capital, allowing the business to distribute more of this cash to shareholders instead of having to reinvest it in the business.

This doesn’t make the FTSE firm risk-free though. One thing I’m mindful of is its large exposure to property markets, leaving Standard Life’s earnings more exposed to interest rates.

Yet I don’t think this will derail Standard Life’s impressive dividend record. Its Solvency II capital ratio of 176% provides a strong buffer against any profits turbulence.

Should you invest £5,000 in Henderson Far East Income right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Henderson Far East Income made the list?

Royston Wild owns shares in Aviva and Primary Health Properties.

The post How much in dividends will these high-yield shares generate in 2026? appeared first on The Twelfth Magpie.

Banking on it

First up is Investec (LSE:INVP). Up 23% in the past year and boasting a 5.79% dividend yield, it ticks both boxes straight away.

The banking group makes its money through two core divisions of Specialist Banking and Wealth & Investment. In simple terms, it lends money to wealthy individuals, entrepreneurs and corporate clients, while also earning fees from managing client assets. That combination matters because it gives Investec multiple revenue streams.

This diversification’s helped it over the past year. In its latest full-year results, operating income rose 5% to £2.19bn while adjusted operating profit climbed 4% to £920m. Importantly, costs increased by only 2.8%, demonstrating strong operational discipline.

As for the dividend, the yield remains well above the FTSE 250 average of 3.39%, but also looks sustainable. The latest annual dividend increased to 36.5p per share, with the payout ratio sitting at around 46%. That leaves a sizeable earnings buffer even if trading conditions weaken.

Looking ahead, the outlook appears solid. Investec continues to attract new clients, increase lending volumes and grow funds under management. The South African wealth business has been particularly strong, while the group’s stake in Rathbones gives it exposure to a much larger UK wealth platform.

Of course, risks remain. The bank still has meaningful exposure to the South African economy, which may worry some given geopolitical concerns.

Heading east

Another idea is Henderson Far East Income (LSE:HFEL). In terms of the numbers, the stock’s rallied 24% in the past year with a dividend yield of 9.38%.

The trust makes money in a fairly simple way. It invests across Asia-Pacific shares, focusing heavily on large dividend-paying companies in markets such as Taiwan and Singapore. Its holdings range across all sectors, whichever generate strong cash flows and pay reliable dividends. The managers then pass much of that income on to shareholders through quarterly payouts.

Asian equity markets have done well given the exposure to tech-linked sectors tied to AI demand and semiconductor growth. This has helped to boost the trust’s net asset value (NAV) and shareholder payouts.

I also think investors are increasingly appreciating the valuation opportunity in Asia. While US shares still look expensive, many Asian dividend stocks trade on far lower earnings multiples while offering much higher income streams. That combination of value and yield is attracting income-focused investors back into the sector.

People still need to be aware that areas such as China are exposed to political risk, with some markets in the region still underdeveloped, posing risks for the trust. Yet I think both stocks could be considered by investors wanting to make the most out of income and growth.

Should you invest £5,000 in Henderson Far East Income right now?

When investing expert Mark Rogers and his team have a stock tip, it can pay to listen. After all, the flagship Twelfth Magpie Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets.

And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Henderson Far East Income made the list?

Jon Smith has no positions in the shares mention

The post These 2 income shares yield over 5.7% and are up over 20% in the last year! appeared first on The Twelfth Magpie.

In recent years that has been an accurate description of one particular FTSE 250 investment trust.

History is not necessarily an indicator of what will happen in future. Still, could things perhaps keep going the way they have been?

Close to a double-digit yield

The share in question is Henderson Far East Income (LSE: HFEL).

It pretty much aims to do what it says on the tin, investing in companies operating in Asia Pacific with the aim of generating cash it can use to fund dividends.

Indeed, as the trust managers say, it “seeks to provide shareholders with a growing total annual dividend per share, as well as capital appreciation”.

Currently, the yield is 9.6%. That puts it among the ranks of high-yield shares in the FTSE 250.

A mixed long-term performance

Not only that, but the trust has been growing its annual dividend each year for well over a decade. It aims to keep doing so, though no share can ever guarantee that its dividend will keep going.

As an income share, then, this has been doing well. But capital gain or loss is also a factor investors need to consider, even when they are buying shares with income as their main focus.

Here, the picture is more mixed.

Over the past year, the Henderson Far East Income share price growth of 28% has outpaced the 20% growth in the wider FTSE 250.

But stepping back and taking a five-year view, we see that while the FTSE 250 has inched up 3% during that period, this particular share has fallen 22%.

A dividend share to consider

That long-term price fall has helped push the dividend yield up.

Still, less positively, the share now sells at a premium of 7% to its net asset value. So, is it still worth considering for an investor looking to grow their passive income streams?

I think the answer is yes.

In general I do not like paying a premium to net asset value.

However, over time, Henderson Far East Income has proven itself as a well-managed, diversified investment trust that has managed to convert growth in Asian economies into chunky dividends for its shareholders.

There are risks, such as the potential for weakening industrial demand in China as higher oil prices pinch.

But as the fund manager said last week specifically in the context of discussing the Middle Eastern war, “the growth drivers of our markets are broad based and have already demonstrated resilience in uncertain times”.

In the short- to medium-term that thesis may be tested. Over the long run, though, I remain upbeat about the share’s income potential.

The post Meet the 9.6%-yielding income share that could keep growing its payout! appeared first on The Twelfth Magpie.

With this in mind, I’ve dug out three of the hottest global dividend stocks to consider today. These are The Renewables Infrastructure Group (LSE:TRIG), Western Union (NYSE:WU), and Henderson Far East Income (LSE:HFEL).

Not only do these income shares carry double-digit dividend years. They also have strong records of dividend distribution behind them, which should allay any fears of them being classic dividend traps. Want to know what makes them in my view so great? Read on…

Green giant

The Renewables Infrastructure Group offers an 11.4% dividend yield for 2026. For next year the reading moves to 11.5%. These are no pie-in-the-sky forecasts — excluding 2021, annual payouts here have risen every year since the stock listed in London in 2013.

But what makes it such a reliable (and big-paying) dividend share? It owns a highly diversified portfolio of renewable energy assets, delivering a predictable cash flow across the economic cycle. Earnings and dividends are also boosted by long-term, inflation-linked contracts with energy suppliers.

Like any renewable energy share, power generation (and by extension) shareholder returns are at the mercy of weather conditions. However, Renewables Infrastructure smoothes out this risk by building wind and solar assets across Europe, which maintains strength at group level.

A top US stock

Western Union’s dividend yields sit at 10% for 2026 and 10.1% for 2027 respectively. Yields have leapt as the share price has declined, reflecting the impact of new fintech companies on its operations.

Put simply, people have a wide choice of options when it comes to sending payments. But in its 125-year history, Western Union has adapted to technological changes and evolving consumer habits. And it has a few tricks up its sleeve to remain profitable, from shifting further into digital payments and away from cash-based agents, to expanding into fast-growth regions.

Last year, for instance, saw Western Union link up with regional operators in Latin America and Saudi Arabia to win new customers. I think it could be a great dip buy to consider — as well as having those double-digit yields, it trades on a forward price-to-earning (P/E) ratio of just six times.

Look east

Henderson Far East Income is listed on the London Stock Exchange. But it’s a great investment vehicle to consider for those hunting international dividend shares.

The trust holds a total of 74 companies spread across Asia including China, South Korea, Hong Kong, and Singapore. This leaves it more vulnerable to regional stress than one with a wider wingspan. But it also means robust returns, reflecting the stunning economic growth of these countries.

Dividends have risen at a steady (if unspectacular) 1.6% each year over the last five years. City analysts expect further growth in 2026, meaning a gigantic 10.8% dividend yield.

Henderson Far East’s annual dividends have risen for 18 straight years, better than most other UK income-paying stocks. I think it’s a brilliant stock to consider for long-term passive income.

The post 10%+ dividend yields! 3 global income stocks to consider for the long term appeared first on The Twelfth Magpie.

A focus on Asia

One share that could be considered right now is Henderson Far East Income (LSE:HFEL). The investment trust currently has a dividend yield of 9.9%, with the share price up 10% in the last year.

The business (as the name suggests) focuses on investing in Asian companies with dividend potential. It then aims to distribute the bulk of the income received as dividends to shareholders. The share price should closely track the net asset value of the trust’s holdings. So the rise over the past year reflects the fund’s successful stock picking.

Some will criticise the performance recently, saying that if the fund had owned more Asian growth stocks, the gains could have been even higher. This is true, but it misses the point of what the trust was set up for. It’s geared towards sectors like banking and telecoms that operate in mature areas. Instead of crazy capital growth, it’s focused on high-dividend areas.

Looking forward, I think this could do well. Tech valuations are high, and so having exposure to more defensive sectors in the market could help to protect the trust performance if we do see a stock market correction.

Building a proper portfolio

Let’s say an investor had just opened a Stocks and Shares ISA to build a second income. The limit for investing in the ISA is £20k a year. For argument’s sake, let’s say this £20k was allocated all to Henderson Far East Income. In theory, for the coming year, this could pay £1,980 just from the cash.

Over time, I don’t think it makes sense to put everything into just one income stock though. The company has risks. For example, it’s concentrated in just a few sectors, and just in the Asian geography. If this part of the world suffers a slowdown due to China or emerging market volatility, it’s a risk.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

But that doesn’t mean that the ISA can’t aim to generate an average yield of 9.9%. There are other stocks with yields in this region. If an investor included other shares in the portfolio alongside Henderson Far East Income, it would act to diversify the risk.

After a decade of keeping up the £20k annual investment, the portfolio could generate just over £39k in income the following year. Of course, this isn’t guaranteed, as dividends might get reduced in the future. This could mean it takes longer to achieve a certain income goal. However, it shows clearly the potential to grow an empty ISA with the right strategy.

The post This income share could transform an empty ISA into a £39k second income appeared first on The Twelfth Magpie.