2 top income investment trusts that could help you retire early

With a long track record of creating value for investors, these investment trusts could help you achieve a carefree retirement.

| 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.

I am very selective about what I include in my retirement portfolio. The companies that make it through have to have a strong track record of producing returns for investors, and I have to be sure that each business can continue to churn out profits year after year.

Law Debenture Corp (LSE: LWDB) is one of my favourite investment trusts for this reason.

Strong track record

Law Debenture is not your average investment trust. This company is a financial services business with an investment trust attached, which was initially established to invest clients’ money. Its professional services arm and investment portfolio is a potent combination that has enabled Law Debenture to generate outstanding returns for investors over the past decade. 

Indeed, over the past 10 years, the firm’s total net asset value return is 169% compared to the FTSE Actuaries All-Share Index total return of 111%. The fund’s total share price return is 203% since June 2008.

And I expect this trend to continue. Law Debenture’s financial services business offers services such as corporate and pension trust management as well as governance solutions, all highly specialist sections of the market where reputation counts for everything and areas where companies are more than happy to outsource to lower costs. Profit after tax at this division increased 10.7% year-over-year for the half year ended 30 June 2018.

Alongside the professional services business, there’s Law Debenture’s investment trust. The portfolio is managed by James Henderson of Janus Henderson Investors. The main holdings are FTSE 100 dividend stalwarts such as Royal Dutch Shell and BP. Some 64% of the portfolio is invested in the UK, with the remainder spread across Europe North America and Asia. So, if you’re worried about the impact Brexit might have on your portfolio, this globally diversified investment trust offers plenty of diversification. Further, the annual management fee is less than 0.5%. 

The latest net asset value (NAV) is 697p per share so you can currently acquire this investment trust at a 12% discount to NAV. The current dividend yield is 2.8%.

Defensive income 

If Law Debenture does not interest you, Target Healthcare (LSE: THRL) might be a better buy. This company owns and operates specialist, purpose-built UK care homes on long leases. 

According to the group’s results for the year ended 30 June 2018, published today, the weighted average unexpired lease term of its current portfolio is 28.5 years. With income guaranteed for nearly three decades on the company’s care home portfolio, I’m confident that Target Healthcare will benefit any retirement portfolio. 

Today the group reported a 3.7% increase in NAV per share to 105.7, along with a 2.7% increase in its annual dividend to 6.5p. Based on these numbers, the trust is currently trading at a slight premium (6%) to underlying NAV and supports a dividend yield of 5.8%.

Target Healthcare might not be shooting the lights out regarding growth, but if you are looking for a long-term income champion, then it seems to me as if this healthcare real estate investment trust has all the hallmarks of an income play you can buy for your retirement portfolio and forget.

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.

Rupert Hargreaves owns shares in Law Debenture Corp and Royal Dutch Shell. The Motley Fool UK has no position in any of the shares mentioned. 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

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 »

Black father and two young daughters dancing at home
Investing Articles

1 FTSE 250 stock I own, and 1 I’d love to buy

Our writer explains why she’s eyeing up this FTSE 250 growth phenomenon, and may buy more shares in this property…

Read more »

View of Tower Bridge in Autumn
Investing Articles

The FTSE 100 is closing in on 8,000 points! Here’s what I’m buying before it’s too late!

As the FTSE 100 keeps gaining momentum, this Fool is on the lookout for bargains. Here's one stock he'd willingly…

Read more »