According to figures from Oriel Securities, there are now only 14 investment trusts yielding over 4 per cent, down from 23 in November, after three months of steady rises in the stock market.
More than half of the trusts yielding over 4 per cent are sitting on a premium, making them less attractive to many investors.
Iain Scouller, head of investment trust research at Oriel, says that the reduction is due to the rise in the share price of the funds, and that yields on the underlying portfolios have actually risen in many cases.
A rise in an investment trust’s share price leads to a fall in its payout, as the latter figure is a percentage of the former, meaning that a rising market would inevitably lead to falling yields if dividends remain stable.
An investor buying into the average income trust now would therefore receive a lower percentage of their initial investment in income than if they had invested a few months ago.
However, some commentators suggest that dividend growth on the stock market may be set to weaken this year, meaning that the threat to income investors may be more than just a mathematical quirk.
The yield on the FTSE All Share is now under 3.5 per cent, a low not seen since the beginning of last year, and has been steadily falling since September.
Ed Beal, manager of the Dunedin Smaller Companies Trust, told FE Trustnet last week that he expected dividend growth to be below investors’ expectations this year.
Performance of trust vs sector over 1yr
Source: FE Analytics
Capita Registrars Dividend Monitor for the fourth quarter of 2012 also foresaw dividend growth down on 2012 this year.
Dividends from the FTSE 100 fell 0.7 per cent in the fourth quarter once special dividends were stripped out, while they fell 4 per cent on the FTSE 250 on the same basis.
The survey warned that a poor final quarter of last year could continue into 2013, and forecasted growth of just 6.8 per cent, down from 8.9 per cent last year.
"Q4 seems to be raising warning signs that rapid growth in dividends may have come to an end," it said.
"It is not possible for dividend growth to outstrip profit growth indefinitely and eventually firms will have to use cash to invest again, or find themselves unable to grow. It seems likely that investors should expect slower progress from here."
Graham Spooner (pictured), investment research analyst at The Share Centre, says that while it is hard to generalise, dividend growth may not be what it has been in the last 12 to 18 months.
Spooner explains that there have already been some companies that have given investors bad news on dividends this year.
"Today we have seen RSA [insurer Royal Sun Alliance] cutting their dividend and there are rumours that Aviva might cut theirs in a few weeks."
A slowdown in dividends could have a positive or negative explanation; companies could be preparing to invest in their business or simply hoarding cash against any further economic struggles. Spooner thinks it is more likely the latter.
"In the light of what we have seen over the last year or two, management has been getting more conservative in the recent climate," he said.
"It could be a sign that they still feel there are a number of headwinds for the market. I would still think they are more on the conservative side rather than preparing to reinvest their cash instead of paying a dividend."
Spooner thinks the real issue for investors is not whether yields are falling, but if those stocks that do continue to have a high payout have become over-bought.
The hunt for yield has led investors to pile into stocks in sectors seen as defensive and prices now seem "toppy", Spooner says.
This may be discouraging managers from buying these high yield stocks and hitting the payout of their funds.
Spooner says that investment trust managers he has spoken to have said they are finding it harder to find value in all sorts of sectors.
"We at The Share Centre have a narrow list of income stocks now; there are only two on our low-risk buy-list right now," he added.
Those two are Centrica and United Utilities, both of which have received less attention from the market and are currently yielding 5 per cent and 4.6 per cent respectively.
However, Spooner thinks that regulatory risk could even be rising in the utility sector.
"Traditionally, utilities have been your first point of call for income, but the sector is not as safe as many investors think."
"Over the next few years there will be plenty of uncertainty around the regulation of the sector."
In an article later today, FE Trustnet will look at those trusts that have managed to maintain their yield as that of their peers has slipped.