Investment trusts feature strongly among the UK’s top-yielding dividend stocks right now. And Schroder European Real Estate Investment Trust (LSE: SERE) is right up there with a potential 9.4% yield.
That’s what it should deliver, if it can simply maintain its dividend levels of the past few years. And we’ll know on Friday (5 December) when the trust delivers full-year results.
It’s the kind of dividend return that could help build a Stocks and Shares ISA into a big contributor to our long-term retirement income, especially if the cash is reinvested.
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European business
The real estate investment trust (REIT) invests in leased office, retail, and other business properties across major European cities. That does expose it to some struggling economies. But against that, it helps reduce overall geographic risk. Unlike UK-based REITS, it’s not at the mercy of the Bank of England or the Chancellor of the Exchequer.
At the interim stage, Chair Sir Julian Berney said: “Despite the company’s fundamentals being solid, supported by strong asset management that has consistently enabled the provision of high stable income for shareholders, the company’s shares are continuing to trade at a persistent discount to NAV.”
With an estimated current net asset value per share of 99.8p, we’re looking at a 37% discount at the time of writing.
Yes, there’s both property risk and risk from European economic weakness. But the dividend yield and discount to NAV have to make it a serious long-term ISA consideration.
Sticking with Europe
TwentyFour Income Fund (LSE: TFIF) is a FTSE 250 investment company. And it invests mostly in asset-backed securities (ABS) in the UK and Europe. It is, though, expanding into Australia and the US too.
It goes for things like mortgages held by smaller financial institutions, credit card debt, and often things with a bit more risk in the pursuit of superior income returns.
The dividend yield has fallen a bit with the shares having risen nicely in the past couple of years.
But November’s first-half results included a 4p interim dividend and reiterated plans for 8p total for the year. So even after recent share price gains, that’s still a 7.1% yield.
Growth opportunities
The company also raised new funds for investment of £64.3m in the first half through a new equity offer.
We heard that: “Despite continued political and fiscal uncertainty, strong supply and demand for ABS remains. Proposed regulatory changes in Europe are likely to further underpin that demand from banks and insurance companies over the longer term.”
In this case, the shares trade at a slight premium to NAV of 1.9%. So that has to suggest some valuation risk.
And though the board is clearly optimistic about the ABS market, such assets do carry risk of defaults that traditional company stocks and corporate bonds don’t.
I definitely wouldn’t rate TwentyFour Income as ideal for risk-averse investors. But for those wanting to spice up their dividend stocks selection and who are well diversified, it has to be one to consider.
