Four alternative options to invest for an income as divis continue to be cut – Telegraph.co.uk

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Investors hoping to get an income from their portfolio must look elsewhere following the slew of dividend cuts as a results of the pandemic.

Businesses have suspended or stopped more than £30bn worth of dividends this year as they conserve cash in an effort to remain afloat during the Covid-19 lockdown. This has caused a gaping hole for investors who may have relied on these payments to help with their living costs.

Telegraph Money looks at four other ways investors can get a reasonable income from funds and investment trusts that should be more reliable than the stock market.

Bonds

When stock markets fall, bonds tend to perform well as investors move their cash to less risky assets. This pushes the price up and lowers the yield. The British Government recently issued a bond with a negative interest rate, meaning investors had to pay them to hold their cash.

While investors have made – and may continue to make – good returns from these funds in capital terms, the average yield on a UK gilt fund is just 0.9pc. This is lower than inflation, meaning investors are unlikely to receive a meaningful payout.

There are better yields from corporate bond funds, which lend money to companies. The £437m Liontrust Monthly Income Bond fund is the highest-paying fund, with a yield of 4.9pc.

TwentyFour Corporate Bond, Fidelity Short Dated Corporate Bond and Schroder Sterling Corporate Bond all also yield more than 4pc per year currently.

The higher the yield, however, the more risk is involved. For bond investors, risk is measured by a company's ability to keep up with its payments. If it cannot, it will default on its loan.

High-yield bonds are even riskier but also offer larger payouts. Known as "junk" bonds, these are typically loans offered to companies that are seen to be in financial difficulty or are small – meaning they are less able to withstand an economic downturn.

For investors willing to take the risk, yields can be as high as 7pc from the Schroder High Yield Opportunities and Invesco High Yield funds.