Open-ended property funds such as Schroder Global Cities Real Estate Income, TIME Investments Freehold Income and Threadneedle UK Property have distributed some of the highest dividend payouts in recent years, research by FE Trustnet shows. 
However, we also found that property investment trusts have managed to put much more cash into their investors’ pockets than their open-ended rivals over the past five years.
Property is one of the go-to sectors for income investors, thanks to the fact that real estate tends to generate a decent rental yield and, in normal circumstances, is less volatile than stock markets. FE Analytics shows that the average IA Property fund posted annualised volatility of 5.57 per cent over the past five years, compared with 8.57 per cent from the IA UK Equity Income sector and 9.18 per cent from the IA UK All Companies sector.
With this in mind, we have looked at the income history for funds in the IA Property sector and the Association of Investment Companies’ property peer groups over the five years to the end of 2017.
Income earned by fund over 5yrs to end of 2017
Source: FE Analytics
The above chart shows the income history of the open-ended fund that came in top place in the IA Property sector. The £47.9m Schroder Global Cities Real Estate Income fund has paid out a total of £3,282.77 on an initial investment of £10,000 made on 1 January 2013.
The fund, which is managed by Hugo Machin and Tom Walker, invests in real estate companies that offer sustainable dividend payments. Its largest holdings are VEREIT, Artis Real Estate Investment Trust and Gaming & Leisure Properties while the biggest geographical exposures are to the US, Australia and Canada.
At the start of 2018 the team behind the fund published the Schroders Global Cities 30 index, which ranks cities on factors such as the projected growth of the economy, university rankings, disposable incomes over the next decade and demographic measures. Los Angeles was named as the top global city for the second time, followed by Hong Kong, London, New York and Shanghai.
As the table below reveals, Schroder Global Cities Real Estate Income is followed in the income payout rankings by TIME Investments Freehold Income, which has distributed £2,980.40 over five years on an initial £10,000.
The £306.1m fund, which is headed up by Nigel Ashfield with Roger Skeldon as deputy, is a portfolio of freeholds. This means it is essentially the landowner of many properties (currently more than 65,000) for which leaseholders must pay an annual fee.
The FE Invest team has put the fund on its Approved List, citing positive features such as a low probability of default from leaseholders (as the annual fees are relatively small) and the scope of periodic uplift to ensure income growth.
“Investors should know that for this fund in particular, large redemptions can be a problem. Selling freehold interests can be a long process because it is strictly regulated. Hence, long-term investing is highly recommended,” the team added.
Source: FE Analytics
MGTS St Johns High Income Property comes in third place after paying out £2,960.52. As its name suggests, the £83.7m fund targets a high yield and long-term capital growth with a bias towards income; the fund’s yield of 5.97 per cent is currently the highest in the IA Property sector.
In seeking a high income, the fund owns properties outside the London and south-east areas, with holdings including retail warehouses in Birmingham, Redditch and Rotherham, a car showroom in Nottingham, retail outlets in Blackpool and Newark, and a hotel in Pembroke.
Some of the sector’s largest funds also appear in the table of those paying out the most income over the past five years. Among those distributing more than £1,900 on an initial £10,000 are the £3.6bn M&G Property Portfolio, £3.1bn L&G Property, £2.5bn Standard Life Investments UK Real Estate and £1.5bn Threadneedle UK Property funds.
However, property investors have been able to secure much larger payouts from the closed-end space over the past five years.
FE Analytics shows that the £475.2m Picton Property Income investment trust has paid out the most on an initial £10,000, with its distributions totalling £4,423.61.
The trust aims to make “an attractive level of income” albeit with the potential for capital growth. From a total return point of view, it is the best performing member of the IT Property Direct – UK sector over three and five years; over 10 years, it has made 150.44 per cent compared with a 66.67 per cent gain from its average peer.
Income earned by trust over 5yrs to end of 2017
Source: FE Analytics
RDI REIT, which resides in the IT Property Direct – Europe sector, comes in second place with its £4,420.14 payout over the five years in question. This £671.6m trust has stated an ambition to become “the UK’s leading income focused REIT”.
Other top performers in the investment space include F&C UK Real Estate Investments (which has paid out £4,350), Standard Life Investments Property Income Trust (with a £3,997.08 payout) and specialist primary healthcare fund Medicx (which has paid out £3,930.21).