High-yielding stocks hold a dangerous allure for investors. Funding daily operations and expansion, alongside keeping investors happy with beefy payouts, is a tightrope few companies can walk for long. When they fall, shareholders are punished twice, first by the dividend cut and second by the hefty share sell-off that follows.
Focusing too much on the dividend-per-share number risks ignoring the returns that can be made by companies putting capital to work elsewhere. River and Mercantile UK Micro Cap Investment Company should convince investors of as much. The investment trust pays no dividend, but it has delivered a share price return of 133 per cent over a year.
That represents a stunning outperformance of the Numis Smaller Companies index (excluding investment trusts), delivering a total return
