2 top-performing investment trusts for dividend investors

These two investment trusts could help you to beat inflation.

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.

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.

With inflation forecast to rise yet further after its increase to 2.9% last month, dividends are likely to remain of high importance to income investors. Certainly, the chances of an interest rate rise appear to be higher following the Bank of England’s Monetary Policy Committee meeting this week. However, the reality is that a 0.25% rise in rates may be insufficient to curb a higher rise in the price level.

As such, buying stocks with upbeat income outlooks could be a wise move. With that in mind, here are two investment trusts with strong dividend potential.

Solid performance

Reporting on Friday was student accommodation real estate investment trust (REIT) GCP Student Living (LSE: DIGS). The company was able to deliver a robust set of results for the most recent financial year, with revenue increasing from £22.5m in the prior year to £28.6m. This was backed-up with a flat operating margin of 79%, while rental growth of 3.9% shows that the company’s operating environment remains resilient.

Net asset value per share increased to 139.08p from 136.93p in the prior year. More growth on this front could be ahead as there remains considerable upward pressure on property across the UK. And since GCP Student Living has a share price of 147p at the present time, it seems to offer a wide margin of safety via a price-to-book (P/B) ratio of just 1.05. This suggests that share price growth could be ahead.

With the company having a dividend yield of 4%, it is likely to offer a positive real return over the long run. Alongside its growth potential and resilient business model, this could increase demand for its shares in future. With a continued imbalance between demand and supply within the UK property sector, the stock could be a solid buy-and-hold for the long run.

Global appeal

Looking ahead, Brexit could have a significant impact on the UK economy. Already, it has contributed to a slowing growth rate, as well as a weaker pound and higher inflation. As such, putting your money into in an investment trust with a global focus could be a sound move to make.

One that has a global outlook is the Witan Investment Trust (LSE: WTAN). It maintains some exposure to UK equities through a 37% holding of UK stocks, but also has a range of other funds and shares within its portfolio. For example, it has a 21% exposure to North America at a time when the US economy appears to be performing well. Higher spending from the Tump administration coupled with the prospect of lower taxes could stimulate the economy yet further.

The company also has a 19% exposure to European equities. Although the impact of QE on the eurozone should not be underestimated, the region appears to offer growth potential. It should help to boost dividend payments in future. And although the Witan Investment Trust currently yields 2%, its dividend growth rate could be relatively high in the long run.

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.

Peter Stephens does not own shares in any of the companies mentioned. 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

Investor looking at stock graph on a tablet with their finger hovering over the Buy button
Investing Articles

2 reasons why I’m loading up on FTSE 100 shares

This Fool thinks FTSE 100 shares look cheap. With that, he plans to continue snapping them up today. Here's one…

Read more »

View of Tower Bridge in Autumn
Investing Articles

Why wait? I’d buy FTSE 100 shares now before the next stock market rally!

Our writer explains why he'd snap up what he sees as bargain FTSE 100 shares now rather than waiting in…

Read more »

Investing Articles

Is it time for me to change my tune about Rolls-Royce shares?

This Fool has steered clear of buying Rolls-Royce shares. But after its recent performance, he's reconsidering his stance. Here's why.

Read more »

Investing Articles

Aviva share price: 3 reasons to consider buying for 2024

The Aviva share price is still lower then when I bought some nearly a decade ago. Here's why I'm thinking…

Read more »

Front view photo of a woman using digital tablet in London
Investing Articles

These 2 shares could bank me £328 a month in second income

Jon Smith runs through two FTSE stocks that have above-average dividend yields that could pay out a generous second income…

Read more »

Stack of one pound coins falling over
Investing Articles

This passive income plan is simple – but could earn me thousands!

Christopher Ruane explains how putting a fiver a day to work in the stock market might help him earn thousands…

Read more »

Three signposts pointing in different directions, with 'Buy' 'Sell' and 'Hold' on

After record profits, are Lloyds shares a buy, sell, or hold?

As Lloyds pulls in pre-tax profits of £7.5bn, boosts its dividend, and continues to repurchase shares, are the company’s shares…

Read more »

Investing Articles

NatWest shares: is a once-in-a-lifetime opportunity on the way?

Should investors get ready for a unique opportunity as the UK government plans to sell off its NatWest shares later…

Read more »