If you are looking for high-quality dividend stocks to add to your portfolio, I highly recommend considering the GCP Infrastructure Investments Ltd (LSE: GCP) fund.
As the name suggests, these types of funds offer exposure to infrastructure projects, which are perfect income-generating assets. They tend to be designed and built to last for many decades, throwing off a steady stream of income that’s usually linked to inflation.
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GCP uses a slightly different strategy, but its overall aim is the same. The company invests in infrastructure loans and has an extensive portfolio of these covering everything from education and healthcare PFI to renewable energy projects. At the end of March, the company portfolio’s contained 47 of these investments, and the largest holding accounted for 11% of assets under management.
So far, the firm has been hugely successful in generating a regular income for investors. For six years in a row, portfolio income has enabled GCP to pay a dividend of 7.6p per share per annum. It looks as if management is planning to keep this track record alive, according to the group’s latest half-year results release.
At the time of writing, this implies the stock has a dividend yield of 6%. Unfortunately, investors will have to pay a premium to get their hands on the market-beating dividend yield. At the end of March, GCP’s net asset value per share was 112.5p.
Currently, the stock is trading at a premium of 13% to the net asset value. Still, I think the premium is worth paying to buy into this diversified portfolio of income-generating infrastructure backed assets. They should continue to throw off a steady income stream for many years to come.
Another income fund I think is worth considering for your portfolio is the Ground Rents Income Fund (LSE: GRIO). Again, as the name suggests, the fund invests in ground rents and head leases across the UK. These assets have an annuity-like cash flow, providing a steady stream of income for decades, or even centuries.
Indeed, at the beginning of August, the company told investors the weighted average duration of leases its portfolio was 345 years. On top of this, income from 70% of the group’s approximately 19,000 investments is linked to inflation and have upward-only rental increases.
Following a review of its strategy at the beginning of August, Ground Rents reaffirmed its commitment to pay out 4p per share per annum to investors as a dividend. At the current share price, that’s equivalent to a dividend yield of 5%.
Also, the stock is trading at a price to book value of just 0.7. This implies the business is worth substantially more than a value of the market is currently placing on it. In my opinion, this valuation gap gives investors a wide margin of safety.
Also, a return to book value would imply an upside of 43% from current levels. That’s why I think it’s worth considering Ground Rents for your portfolio today.