The ISA deadline for the 2018/19 tax year is tomorrow. So if you’ve not already topped up your ISA, now is the time to do it.
And if you are looking for somewhere to invest your funds, I’m going to take a look at two of my favourite dividend investment trusts and outline why I think they deserve a place in your Stocks and Shares ISA.
My first investment trust pick for income investors is Law Debenture Corp (LSE: LWDB). This company’s a bit of an anomaly in the investment trust world because it’s essentially a financial services business with an investment fund attached.
The financial business provides essential management services to pension providers and asset managers. This side of the company is growing rapidly. Revenues increased 9% in 2018 and management is expecting this trend to continue into 2019, which should support further dividend growth.
Indeed, this side of the business has helped the investment trust build a 40-year track record of dividend increases. During this period, the firm has delivered annualised dividend growth of 4.5%. On top of the investment business, there’s the group’s investment trust portfolio, which is currently comprised of leading blue-chip FTSE 100 dividend stocks.
Management has followed a similar investment strategy for the past few decades and, over the past 10 years, growth of the portfolio combined with the growing investment services business has produced a total share price return for investors of 240.3%. That means £1,000 invested in Law Debenture 10 years ago would have been worth £3,4351 at the end of 2018.
At the time of writing, the shares support a dividend yield of 3.1% and trade at a discount to the net asset value of around 7%. The annual management charge is approximately 0.45%.
Law Debenture’s portfolio is very UK-focused. Considering all of the uncertainty facing the UK right now, I think it’s also sensible to have some exposure to international stocks, and Murray International Trust (LSE: MYI) meets this aim perfectly, in my view.
Murry International’s portfolio is invested around the world, predominantly in North America and Asia Pacific. Only 10% of the portfolio is invested in UK equities, and the rest is spread globally, invested in cash-rich, high dividend stocks such as Mexican airport operator Grupo Aeroportuario del Pacífico.
Other global income investments included Taiwan Semiconductor, Unilever Indonesia and Chilean Chemical company Sociedad Química y Minera.
This global income portfolio provides a steady income for the trust, which it then returns to shareholders. The current dividend yield is 4.4%.
The one downside of this international portfolio is that it’s slightly more expensive to maintain than a domestic-focused investment trust. Murray International’s annual expense ratio is 0.7%, and the shares currently trade at a premium to net asset value of 3.5%.
Still, I think it’s worth paying the extra money to get exposure to a broad basket of international income investments, managed by a highly experienced team. The firm’s senior investment manager is Bruce Stout who’s been investing internationally since 1987. That’s why I’m buying Murray alongside Law Debenture for my ISA today.