Discover 2 reliable FTSE income trusts with dividend yields above 10%
High dividend yields are often treated as a trap. In most cases, when a company offers investors more than 10% a year, alarm bells should be ringing.
After all, firms have to balance shareholder rewards with reinvestment in their operations. If the payout is too generous, profits eventually suffer. And when profits fall, dividend cuts usually follow. More often than not, a double-digit dividend yield is the sign of a sinking share price, not a sustainable stream of income.
But there are exceptions. Some investment trusts are specifically designed to deliver high yields and long-term income for their shareholders. A couple of these look surprisingly steady to me, despite their eye-watering payouts.
Here are two that stand out on the FTSE.
Henderson Far East Income
This £419m trust has one of the highest yields on the market, sitting at a hefty 10.78%. Normally, that would have me suspicious. But Henderson Far East Income (LSE: HFEL) has a long track record of rewarding shareholders, with 15 consecutive years of dividend growth.
Its current share price is 231p, up 1.7% in 2025, and it typically trades at a small premium to net asset value â currently around 4.18%. The portfolio is stacked with Asian heavyweights, including Taiwan Semiconductor Manufacturing Company, CTBC Financial, China Hongqiao Group, Evergreen Marine and Tencent.
Financially, it is something of a mixed bag. A net margin of 66.8% is impressive, and the return on capital employed (ROCE) of 5.36% shows efficiency. But the payout ratio of 207.8% suggests dividends are not well-covered by earnings, which risks a cut if profits slide.
At a price-to-earnings (P/E) ratio of 19.3, the trust is not cheap either. Still, given its 15-year dividend history, I think it is worth considering as part of an income portfolio — albeit, with limited growth potential.
SDCL Energy Efficiency Income Trust
This one is a little different. Rather than focusing on big-name equities, SDCL (LSE: SEIT) invests in energy efficiency projects across Europe, America, South East Asia and Africa, spanning healthcare, retail, industrial and commercial sectors.
With a market-cap of £637m and a share price of 58p (up 6.36% this year), it offers a dividend yield of 10.77%. Unlike Henderson, its payout ratio of 97.8% looks far more sustainable â but it only has six years of consecutive dividend growth under its belt.
Still, the numbers look solid. A staggering net margin of 94.8% makes for highly profitable operations, and with a P/E ratio of just 9.1, the trust actually looks undervalued compared to peers. The balance sheet is strong too, with no debt â rare for an investment trust.
The main risk is political. With shifting policies in the US leaning back towards fossil fuels, renewable and sustainable energy projects could face pressure. But with such strong financials, I feel confident in its dividend policy and believe it is worthy of further research.
Final thoughts
Most double-digit yields in the FTSE are unsustainable. But investment trusts like Henderson Far East and SDCL Energy are built with income in mind. Both come with risks — one looks overvalued, the other exposed to policy headwinds — but their commitment to shareholder returns gives them credibility.
For long-term income investors, I think these trusts are among the rare few where a dividend yield above 10% is actually worth considering.
The post Discover 2 reliable FTSE income trusts with dividend yields above 10% appeared first on The Motley Fool UK.
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Mark Hartley has no position in any of the shares mentioned. The Motley Fool UK has recommended Taiwan Semiconductor Manufacturing. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
