2 top investment trusts for retirement income

These equity income investment trusts seek to deliver a reliable and growing income.

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Investment trusts are fertile hunting ground for retirement investors seeking a reliable and growing income. It doesn’t take much effort to find yields of at least 3% from a number of well-managed investment trusts, with some having multi-decade-long track records of year-in, year-out increases in their dividend payouts.

Mark Barnett

In the UK equity space, the Perpetual Income & Growth Investment Trust (LSE: PLI) offers a promising income outlook with a dividend yield of 3.8%.

It’s an investment trust which is run by well-regarded fund manager Mark Barnett. He has been at the helm of the fund for nearly 19 years now, using a long-term, high conviction approach to select stocks. The fund seeks to achieve capital growth and real growth in dividends over the medium-to-long term.

Barnett is a valuation-driven stock picker that reckons attractive opportunities exist in areas which would traditionally be seen as uncorrelated to the wider market and economy. He is bullish on a number of UK domestically-exposed companies and has recently increased the portfolio’s UK domestic exposure via new investments in A J Bell, British Land, Eddie Stobart Logistics, McBride and Secure Income REIT.

Value for money

The trust also stands out for investors seeking good value for money. With shares in the fund trading at a 12% discount to its net asset value (NAV), prospective investors have the chance to buy a stake in the fund’s assets for less than the sum of its parts.

Perpetual Income & Growth’s discounted valuation reflects negative sentiment towards the fund after its recent underperformance against the benchmark FTSE All-Share Index. The fund has been underperforming the market for two consecutive years now, missing out from the commodities-led recovery in the stock market due to its limited exposure to mining stocks and greater domestic focus.

Longer term, however, its track record is still impressive with the fund achieving a cumulative NAV total return of 136% in the 10 years leading to 31 March 2018, against the benchmark’s gain of 91%. What’s more, fund fees are relatively low, with ongoing charges of just 0.7% last year, marking it out as an attractive core investment position.

Track record

The Scottish American Investment Company (LSE: SCAM) is another good option for investors seeking steady income growth. In the global equity income space, the fund has one of the longest track records for raising its annual dividends, with 37 consecutive years under its belt.

The trust is one of the oldest investment trust companies still in existence, dating back all the way to 1873, although it has since undergone significant changes in terms of its investment strategy and management. Its current aim is to grow its dividends at a faster rate than inflation by increasing capital and growing income.

Its portfolio is merely globally diversified, but also has exposure towards other asset types, such as bonds and property. Equities still account for 80.1% of total assets, and the trust’s largest stock holdings include Deutsche Boerse (2.1%), ANTA Sports Products (2.0%), Coca Cola (1.9%), CH Robinson (1.9%) and Prudential (1.9%). UK property investments account for a further 14.9%, while fixed income represents 5% of its assets.

Scottish American provides a dividend yield of 3%, with shares trading at a slight premium to NAV of 4%.

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 considered so you should consider taking independent financial advice.

Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended British Land Co. 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.

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