Investment trusts can provide profitable long-term dividend yields. I own City of London Investment Trust, for example, which has raised its dividend every year for an amazing 59 years in a row. It currently offers a yield of 4.3%.
But, at the moment, I’m seeing a handful with higher yields I think deserve a closer look.
One is Alternative Income REIT (LSE: AIRE), with a forecast 8% dividend yield. It’s a real estate investment trust, and it invests in a broad range of commercial properties in specialist sectors.
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Tough decade
The share price has recovered reasonably well since the pandemic days. But it’s had a poor decade overall, down 31%.
That price fall, though, has helped build up a decent discount to net asset value (NAV). The company reported a NAV per share of 83.6p at 30 June. And with the shares currently selling for 70.7p, that’s a 15% discount.
The main risk has been the company’s debt, with a £41m loan coming due in October. With interest rates relatively high, the cost of refinancing it could impact on the dividend.
But on 3 September, the trust announced a new long-term refinancing facility with HSBC UK Bank, the local HSBC Holdings subsidiary. Financing costs have risen. But the company expects its next full-year dividend to fall only modestly — from 6.2p per share to 5.6p. And that’s the 8% yield — forecasts already had the dip built in.
Long-term debt fears, plus an uncertain outlook for real estate, could weigh on future dividends — which are never guaranteed. But I have this on my list of possible buys.
Look east
The world might be gripped by trade friction between the US and China these days. But I reckon anyone who writes off the Asia Pacific region as an investment could be making a mistake.
That brings me to Henderson Far East Income (LSE: HFEL), which invests where its name suggests. The dividend yield? Forecast at a whopping 10.2%.
We’re looking at another rocky share price ride here, with a fall of around 38% since late 2017.
There’s one thing I think is essential for stock market investors, and this investment trust had it in spades — I’m talking diversification. Henderson Far East holds interests in China, Taiwan, Korea, Australia, India, Indonesia, and other countries. And it invests in financial services, technology (including AI), consumer goods, communications… a wide range of sectors.
We don’t have a discount to NAV here. In fact, the stock is currently on a 4.5% premium. So there’s perhaps a bit less safety margin. But in its interm report, the company said its “performance both in NAV and share price total return terms was positive over one, three, five and ten years“.
I can see geopolitical risk continuing for some time yet — especially with the end results of the US tariff war so very unknown.
But who thinks we’ll see strong economic growth and shareholder returns from the Far East in the coming decades? You might want to join me in considering buying some of this one.
