Two brand new investment trusts for income-hungry investors

These promising investment trusts are targeting 4.75%+ dividend yields and impressive capital appreciation for their shareholders.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

General market volatility and dampened investor enthusiasm has seen a slight slump in the amount of capital raised by new investment trusts in 2018, but a few interesting companies have still managed to recently raise cash from public markets.  

One such firm is Tritax EuroBox (LSE: EBOX), a REIT focusing solely on European big box warehouses. If the name sound familiar that’s because Tritax is the manager behind the UK-focused Tritax BigBox, which has done very well and over the past five years delivered a total return of over 80% thanks to a hefty dividend and capital appreciation.

The plan for EuroBox is much the same as for Tritax’s first publicly-traded REIT, namely to use the £301m it raised with its IPO to buy up large warehouses situated near major motorways and sign long-term leases with blue-chip customers. This same strategy has worked phenomenally well in the UK thanks to fast-rising demand for such warehouses from pureplay e-commerce retailers and traditional retailers that need to quickly and efficiently deliver goods to customer’s homes as well as to stores.

With little to suggest that this trend will slow down any time soon, EuroBox is well-positioned then to profit from its ability to purchase existing locations or to build its own warehouses on a completely pre-let basis, which removes a huge amount of risk for the fund and investors. As the fund just went public and is in the process of making its first purchases, returns are completely hypothetical right now, but Tritax is targeting a 4.75% dividend yield and medium-term target return of 9%.

Both of these targets look eminently achievable in my eyes and given Tritax’s great track record with BigBox, I think income investors would be well-served by checking out EuroBox for themselves.

A novel market newcomer

While EuroBox investors can at least use the track record of BigBox and US-listed warehouse REITS as a guide to what to expect, investors in the brand new Hipgnosis Songs Fund (LSE: SONG) are very much on their own.

Hipgnosis has been set up by music industry veteran Merck Mercuriadis, who has served as manager to Elton John and Guns N’ Roses among other big names, to purchase writers’, publishers’ and performance rights to songwriters’ creations. The company’s IPO raised £202.2m towards the end of June and the fund has already made its first investment, a 75% interest in the catalogue of songwriter The-Dream for $23.75m. This purchase includes the rights to 302 songs performed by artists such Justin Bieber, Jay-Z and Rihanna.

Once it owns the songwriter’s rights to songs, the fund can license them as well as earn royalties each time they are played. This income stream is intended to be directed towards further acquisitions and steady dividends paid to shareholders. Management’s target is for an initial dividend yield of around 5% with annual NAV returns of 10%.

The fund is certainly a novel idea and with big names in the music industry lined up behind it, it certainly won’t lack for insider knowledge and expertise. However, with a relatively untested businesses model I’ll be watching from the sidelines for the time being to see how it all shakes out for Hipgnosis. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has recommended Tritax Big Box REIT. 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.

More on Investing Articles

Young mixed-race couple sat on the beach looking out over the sea
Investing Articles

I’d put £20K in an ISA now to target a £1,900 monthly second income in future!

Christopher Ruane shares why he thinks a long-term approach to investing and careful selection of shares could help him build…

Read more »

Mature couple at the beach
Investing Articles

6 stocks that Fools have been buying!

Our Foolish freelancers are putting their money where their mouths are and buying these stocks in recent weeks.

Read more »

Black woman using loudspeaker to be heard
Investing Articles

I was right about the Barclays share price! Here’s what I think happens next

Jon Smith explains why he still feels the Barclays share price is undervalued and flags up why updates on its…

Read more »

Investing Articles

Where I’d start investing £8,000 in April 2024

Writer Ben McPoland highlights two areas of the stock market that he would target if he were to start investing…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Ahead of the ISA deadline, here are 3 FTSE 100 stocks I’d consider

Jon Smith notes down some FTSE 100 stocks in sectors ranging from property to retail that he thinks could offer…

Read more »

Young female business analyst looking at a graph chart while working from home
Investing Articles

Why I think Rolls-Royce shares will pay a dividend in 2024

Stephen Wright thinks Rolls-Royce shares are about to pay a dividend again. But he isn’t convinced this is something investors…

Read more »

Investing Articles

1 of the best UK shares to consider buying in April

Higher gold prices and a falling share price have put this FTSE 250 stock on Stephen Wright's list of UK…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

The market is wrong about this FTSE 250 stock. I’m buying it in April

Stephen Wright thinks investors should look past a 49% decline in earnings per share and consider investing in a FTSE…

Read more »