If I was starting over as an investor today, I’d probably put some of my money into investment trusts. These are similar to investment funds, but with some structural differences. Trusts also tend to have lower fees, which is always a good thing.
55 years of dividend growth
The first trust I want to write about today has increased its dividend for 55 consecutive years. City of London Investment Trust (LSE: CTY) was formed in 1860 and has been investing in the stock market in its current form since 1932.
As you might guess, the main aim of this investment trust is to provide a reliable income, backed by long-term capital growth. The majority of the stocks the trust invests in are FTSE 100 firms with a solid record of dividends.
For example, the top 10 holdings currently include British American Tobacco, Shell, drinks giant Diageo,and pharmaceutical group AstraZeneca.
City of London currently offers a dividend yield of 4.7%, compared to around 3.7% for the FTSE 100. Broadly speaking, the value of the trust has followed the FTSE 100 in recent years.
There’s no guarantee that future performance will reflect the trust’s past results. But with such a long track record, I’m confident this strategy will continue to perform well.
Global growth stocks
My next pick is completely different. Scottish Mortgage Investment Trust (LSE: SMT) is known for its long-term focus on disruptive growth businesses. Top holdings include vaccine firm Moderna, Amazon, Tesla, and luxury group Kering.
The trust’s share price spiked up during the pandemic but has now returned to more reasonable levels. I’m starting to think this could be a good time to buy.
Scottish Mortgage is unusual in that the trust’s management really do take a differentiated approach to picking growth stocks. Although their top holdings are household names today, in many cases the trust invested a long time ago, when the businesses were much smaller.
Despite last year’s sell off, Scottish Mortgage shares are up by 360% over the last 10 years. That’s the kind of horizon investors need to have here, in my view.
The trust’s long-term approach means that it could be many years before we find out whether Scottish Mortgage has successfully identified the next big growth opportunities.
Despite this risk, I’d allocate some of my portfolio to Scottish Mortgage. It’s genuinely different and has a very strong record.
A 6% yield from renewables
JLEN Environmental Assets (LSE: JLEN) invests in a wide range of renewable projects. Wind and solar account for around 40%, but the trust is also invested in waste and bioenergy, anaerobic digestion, and a range of other growing areas.
In total, the trust has £12bn of assets under management, with 3.1GW of electricity generating capacity. Much of its annual income is supported by fixed price agreements and subsidies, so there’s good visibility for the years ahead.
Of course, subsidies highlight a risk, too. Government policies can change. These projects might be less profitable in the future.
However, JLEN Environmental Assets is run by experienced managers and has been operating in this sector for nearly 10 years. That’s quite a long time in renewables.
Management have increased the dividend every year since the trust’s 2014 IPO. The shares currently offers a 6% yield. I’m thinking about buying.
