I’d love to buy this investment trust in February for its 4.37% dividend yield, but there’s one thing stopping me

As a rule, I prefer to maximize my dividend yield by buying individuals FTSE 100 stocks instead of investing through funds.

I love the challenge of hunting down the top stocks, and analyzing them to see if they can generate dividend income and capital growth over the long term. I’m no Warren Buffett, but I’ve done well enough.

I hunt FTSE 100 income stocks

With the FTSE 100 close to an all-time high, I have some time. I went on a spree in autumn, when the index was low, and picked it up Lloyds Banking Group, persimmon, Rio Tintoand Rolls-Royce.

When it was early doors, all four have rebounded strongly, with Rolls-Royce the cream of the crop, up 30.84% ​​since I bought it on November 1. For the record, the stock price is still down 3.45% over 12 months and 63% over five years. Rolls-Royce is not paying me a dividend at the moment, but I hope to resume shareholder payments this year or next.

I don’t get the same excitement from buying investment funds, because the average growth comes out in dozens of stocks. But I was very tempted by the very popular investment trust in the UK Equity Income sector.

It is called Merchants Trust (LSE: MRCH), is managed by Allianz Global Investors, which manages assets totaling £837m. The trust’s objective is to provide a higher level of income, income growth and long-term capital growth by investing primarily in large, higher yielding UK companies.

It is notable for its proud record of increasing its annual dividend every year for 40 years. The trader is currently offering investors an annual income of 4.37%.

This fund is 95% invested in UK stocks. The top 10 holdings include the dividend aristocrats shell, England American Tobacco, GSK, BP, Imperial brandand Rio Tinto. These are all familiar names for Fool investors.

I’ll buy the stock myself, thanks

Traders have benefited from the FTSE 100’s rebound, and are up 13% in three months. Over a year, it was up 8.8% and an even more impressive 58% over five years. As with any stock market investment, past performance does not guarantee future returns, and dividends are not guaranteed.

The trust has an ongoing expense ratio (OCF) of just 0.59%. It currently trades at a slight premium to net asset value, just 0.9%. It is not unusual for Merchants, which is a premium fund. Investor demand is strong and steady as is performance.

Of course, the price could fall if the FTSE 100 dips, so now is not the best time to buy, as it is currently strong. But it looks like a long-term buy and hold, so what’s stopping me from buying it?

It’s a personal thing. I love looking for individual stocks to build my own portfolio. After recent success, I will stick with the direct equity strategy. Investors who want fund managers to do the job may have a different view. Here at Fool, we believe that individual investors are best placed to take charge of their own financial future.