Investors searching for high-dividend-yield stocks in the UK often look for reliable income investments that offer both strong payouts and growth. The Aberdeen Asian Income Fund (LSE: AAIF) stands out with a 7% dividend yield, 16 consecutive years of dividend growth, and an average annual growth rate of 22%. But is this the best income stock available, or are there better alternatives?
Why Aberdeen Asian Income Fund Looks Attractive
1. High & Sustainable Dividend Yield
-
7% dividend yield – significantly higher than the FTSE 100 average (~3.5-4%).
-
67% payout ratio – indicating the dividend is well-covered by earnings.
-
16-year dividend growth streak – a strong track record of increasing payouts.
2. Diversified Asian Exposure
The fund invests in high-quality dividend-paying companies across Asia, including:
-
Taiwan (TSMC)
-
Singapore (DBS Group)
-
China (Tencent)
-
South Korea (Samsung)
-
India (HDFC Bank, Reliance Industries)
This geographic diversification reduces risk while providing exposure to fast-growing Asian economies.
3. Strong Historical Performance
-
Total return (including dividends) of 60.8% over 5 years – outperforming the MSCI Asia Pacific Index.
-
Not a high-growth stock, but a steady income generator with low volatility.
Potential Risks & Drawbacks
1. High Fees
-
1.6% total expense ratio (including a 0.75% management fee).
-
Over time, fees can erode returns, especially for income-focused investors.
2. Trading at a Discount to NAV
-
Shares have traded at a 10-15% discount to net asset value (NAV).
-
While this could present a buying opportunity, it also reflects market caution around Asian equities.
3. Geopolitical & Economic Risks
-
US-China tensions and Taiwan risks could impact performance.
-
Currency fluctuations may affect returns for UK investors.
Are There Better UK Income Stocks?
Comparison with Other High-Yield Trusts
| Investment Trust | Dividend Yield | Dividend Growth Streak | Payout Ratio | Avg. Annual Growth |
|---|---|---|---|---|
| Aberdeen Asian Income (AAIF) | 7% | 16 years | 67% | 22% |
| Value & Indexed Property Income Trust | 6.6% | 19 years | 96% | 4.5% |
| Aberdeen Equity Income | 5.8% | 10 years | 75% | 8% |
While AAIF offers a higher yield and faster growth, the Value & Indexed Property Income Trust has a longer dividend growth history, though with slower growth and a higher payout ratio.
Final Verdict: Is This the Best UK Income Stock?
✅ Pros:
-
High, sustainable 7% yield
-
16 years of dividend growth
-
Diversified Asian exposure
-
Strong historical returns
❌ Cons:
-
High fees (1.6%)
-
Geopolitical risks in Asia
-
Trading at a discount to NAV
Who Should Invest?
-
Investors seeking high-yield dividend stocks with growth potential.
-
Those comfortable with Asian market risks.
Who Should Avoid?
-
Investors preferring lower-fee UK income stocks.
-
Those concerned about geopolitical instability.
Alternative Opportunity: AI Growth Stocks
If you’re also interested in high-growth investments, consider AI stocks with massive potential. The Motley Fool’s latest report, “AI Front Runners: 3 Surprising Stocks Riding The AI Wave,” reveals top AI picks – and you can access one for free today!
