2 defensive income investment trusts I’d buy for my ISA

Do these investment trusts offer the most secure income streams on the market?

| 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.

Cogs turning against each other

Image source: Getty Images.

Healthcare and property are typically considered the market’s two most defensive sectors, which is why I’m attracted to healthcare real estate investment trusts Impact Healthcare (LSE: IHR) and Target Healthcare (LSE: THRL)

These two companies offer the perfect blend of income from property with the long-term durability of healthcare, two qualities few other companies can match. 

5 Stocks For Trying To Build Wealth After 50

One notable billionaire made 99% of his current wealth after his 50th birthday. And here at The Motley Fool, we believe it is NEVER too late to start trying to build your fortune in the stock market. Our expert Motley Fool analyst team have shortlisted 5 companies that they believe could be a great fit for investors aged 50+ trying to build long-term, diversified portfolios.

Click here to claim your free copy now!

High-quality income 

Target Healthcare’s goal is to “acquire a diversified portfolio of high-quality modern care homes providing excellent accommodation standards” while at the same time generating a sustainable income stream from rents for investors and maximising shareholder returns.

Today the company reported its results for the six months to 31 December and gave updates on these critical objectives. At the end of 2017, EPRA net asset value per share was 104.4p, up 2.5% and the trust achieved a total return for investors during the period of 5.7% including share price appreciation and dividends. Five new properties were added to the rent roll in the period, including the completion of one development asset and four acquisitions, taking the total value of Target’s property portfolio to £335m. Three new tenants were added during the period increasing the “diversity of portfolio income” to 19 tenants with an average weighted unexpired lease term of 28.9 years and loan-to-value ratio of 24.2%. 

Based on the numbers reported by the firm today, shares in Target are currently trading with a dividend yield of 6.4% and a discount to net asset value of 1%. Granted, the company is never going to win any awards for earnings growth, but its sustainable income stream from property (locked in for nearly three decades) is highly attractive. Also, a robust and unleveraged balance sheet should help management grow the dividend further through the acquisition of new properties. 

With this being the case, I’m considering adding Target to my ISA portfolio as a defensive income play. 

6% dividend yield 

Impact is also targeting a dividend yield of 6%. The company only went public at the beginning of 2017, and it still flies under the radar of most investors. Indeed, since hitting the market, the share price has hardly budged. Still, management is targeting a dividend of 6p per share per annum, paid in quarterly instalments, which equates to a dividend yield of 6% based on today’s share price of 100p. 

Like Target, Impact owns a portfolio of care homes, and while management does have plans to expand the portfolio gradually over the next few years, the company is limited to borrowing 35% of the gross value of its asset portfolio, which in my view makes this an exceptionally defensive, fiscally responsible business. 

What’s more, all of the company’s clients are on long-term leases with a weighted average lease term of 19.2 years and an annualised rent roll of £11.9m. There are annual rental uplifts based on the retail price index with a floor of 2% and cap of 4% per annum. So, just like Target, Impact offers a defensive income stream that is set to grow with inflation and is tied to multi-decade contracts. The firm’s strong balance sheet only adds to its appeal.

Is this little-known company the next ‘Monster’ IPO?

Right now, this ‘screaming BUY’ stock is trading at a steep discount from its IPO price, but it looks like the sky is the limit in the years ahead.

Because this North American company is the clear leader in its field which is estimated to be worth US$261 BILLION by 2025.

The Motley Fool UK analyst team has just published a comprehensive report that shows you exactly why we believe it has so much upside potential.

But I warn you, you’ll need to act quickly, given how fast this ‘Monster IPO’ is already moving.

Click here to see how you can get a copy of this report for yourself today

Rupert Hargreaves owns no share 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

Social media and digital online concept, woman using smartphone
Investing Articles

Apple stock: Buffett is long, Burry is short. What should I do?

Our author thinks about whether following Warren Buffet into Apple stock might be a good addition to his portfolio –…

Read more »

Close-up of British bank notes
Investing Articles

5 ‘no-brainer’ dividend shares to buy today

Is there an easy way to narrow down the list of FTSE 100 dividend shares? I try one approach, with…

Read more »

Close-up of British bank notes
Investing Articles

£5,000 to invest? 2 dividend-paying penny stocks I’d hold to 2030

I think these high-yielding penny stocks could help cushion the impact of high inflation on my returns. Here's why I'd…

Read more »

Renewable energies concept collage
Investing Articles

2 green stocks that I think are no-brainer buys for the future

Jon Smith explains two of his favourite green stocks at the moment, one for growth and the other for income…

Read more »

An airplane on a runway
Investing Articles

The Rolls-Royce Share price may be set for take-off!

After an upbeat Civil Aerospace Investor Day, here's why I think the Rolls-Royce share price could be set for take-off…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

2 beaten-down growth stocks to buy as inflation rises

Despite inflationary pressures and recession concerns, I am looking at some top growth stocks to solidify my portfolio over the…

Read more »

Stack of British pound coins falling on list of share prices
Investing Articles

Is the IAG share price too good to miss at current levels?

Jabran Khan delves deeper into the current state of play with the IAG share price and decides if now is…

Read more »

Young woman working at modern office. Technical price graph and indicator, red and green candlestick chart and stock trading computer screen background.
Investing Articles

5 of the highest-paying income stocks compared! Which one is best for my portfolio?

Income stocks are certainly in vogue right now amid sky-high inflation. But which of these big dividend payers is the…

Read more »