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.

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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.

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