Buying these 2 high-yield investment trusts in a £20k ISA would give me £1k yearly income

I’m tempted by these two investment trusts that offer a high yield from investing in UK shares. But should I pick my own stocks?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

Mature black couple enjoying shopping together in UK high street

Image source: Getty Images

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Investment trusts are a brilliant way of generating passive income from a diversified portfolio of shares, and the best can offer a really high yield.

While I prefer to pick my own dividend income stocks, investment trusts can do a brilliant job, too. The very best aim to pay a steadily rising income by retaining some dividends in the good years and using them to top up returns when businesses are cutting shareholder payouts.

JP Morgan Claverhouse Investment Trust (LSE: JCH), launched in 1963, has increased its annual payout for an incredible 50 consecutive years, making it a true Dividend Aristocrat. It has done this by investing in a pool of UK equity income stocks. The trust’s top 10 holdings include familiar names such as Shell, HSBC, AstraZeneca, BP, and Glencore.

Consistent income growth

Currently, it yields an attractive 5.32% a year. That’s comfortably above the FTSE 100 average, which is closer to 3.8%. While dividend income is never guaranteed, Claverhouse is one of the safest ways of getting access to the rising passive income stream they offer.

Its share price total return isn’t as impressive as I’d like. As my table shows, the £383m fund has struggled to beat its benchmark, the Association of Investment Companies UK Equity Income Sector. Its 10-year return is impressive though.


One yearThree yearsFive years 10 years
JPM Claverhouse-0.7%36.1%7.00 %77.5%
AIC Equity Income3.6%36.5%17.6%69.5%

Claverhouse is currently trading at a discount of 5.51% to the value of its underlying assets. That reflects a tough year for UK shares. Now could be a good time to buy before interest rates peak and UK shares recover. Its ongoing charge is 0.7% a year.

The Lowland Investment Company (LSE: LWI) also offers investors a combination of growth and income from stocks mostly listed on the FTSE All-Share, and currently yields marginally more at 5.42%.

Aim high, buy Lowland

Managed by Janus Henderson, Lowland also features Shell, BP, and HSBC among its top 10 holdings. It also invest in small and medium-sized companies, with big positions in companies I don’t know much about, such as FBD, Irish Continental Group, and Serica Energy. Its long-term total return has been surprisingly low at just 26% over 10 years, which leaves it well below its benchmark. Yet the last three years were more impressive.


One yearThree yearsFive years 10 years
Lowland-3.20%40.50%-4.80 %26.00%
AIC Equity Income3.6%36.5%17.6%69.5%

Lowland, also launched in 1963, has increased its dividend every year for the last 13 years, so it’s not at Claverhouse levels yet. What really tempts me is that the £398m fund trades at a wide discount of 12.6% to its underlying net assets. The ongoing charge is 0.6% a year.

If I split a £20,000 Stocks and Shares ISA allowance between these two investment trusts, I would get a yield of 5.37% a year. That will give me £1,074 a year. Better still, history suggests that will rise steadily over time.

Investors who want a manager to pick stocks on their behalf could do a lot worse than buying these two investment trusts. Personally, I’d hope to do better with a concentrated portfolio of around a dozen dividend income stocks I bought myself.

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.

Harvey Jones has no position in any of the shares mentioned. 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.

More on Investing Articles

Fireworks display in the shape of willow at Newcastle, Co. Down , Northern Ireland at Halloween.
Investing Articles

How would I start planning my Stocks and Shares ISA for 2025? With this super-solid growth stock

I can’t think of a better way to prepare for a new year than opening a fresh Stock and Shares…

Read more »

Hand of person putting wood cube block with word VALUE on wooden table
Investing Articles

Down 26% to just £4, Glencore’s share price looks cheap to me right now

Market pessimism over China’s economic growth has helped push Glencore’s share price down but I think this is overdone, leaving…

Read more »

Number three written on white chat bubble on blue background
Investing Articles

Just released: the 3 best growth-focused stocks to consider buying in November [PREMIUM PICKS]

Our goal here is to highlight some of our past recommendations that we think are of particular interest today, due…

Read more »

Shot of a senior man drinking coffee and looking thoughtfully out of a window
Investing Articles

Why now could be the time to get ready for a stock market crash

Both the FTSE 100 and the S&P 500 climbed after the US election results. But Stephen Wright thinks now is…

Read more »

Portrait of elderly man wearing white denim shirt and glasses looking up with hand on chin. Thoughtful senior entrepreneur, studio shot against grey background.
Investing Articles

A UK share and an ETF that could soar following Trump’s election win

Donald Trump's White House return poses huge uncertainty for the global economy. But this UK share and ETF could gain…

Read more »

A pastel colored growing graph with rising rocket.
Investing Articles

2 FTSE stocks that demonstrate the best (and worst) of the AIM market

Our writer looks at the performance of two very different FTSE stocks that highlights the pros and cons of investing…

Read more »

Mature Caucasian woman sat at a table with coffee and laptop while making notes on paper
Investing Articles

With a P/E ratio of 8 and selling for pennies, is this FTSE 250 share a bargain?

Christopher Ruane digs into a cheap-looking FTSE 250 share that sells an iconic product and considers whether it's really a…

Read more »

Warren Buffett at a Berkshire Hathaway AGM
Investing Articles

Could the stock market crash in 2025?

Our writer considers some possible drivers for a stock market crash. Rather than try to time it, he's wondering how…

Read more »