Investment trusts can be a great way to add diversification to your portfolio. With one simple trade, you have the ability to invest in a portfolio of securities, managed by a professional fund manager. With that in mind, today I’m looking at three dividend-focused investment trusts that could appeal to those looking for high levels of income from their portfolios.
Murray Income Trust
Run by Aberdeen Asset Management, the Murray Income Trust (LSE: MUT) is an investment trust that aims to achieve a high and growing income, combined with capital growth. The trust invests predominantly in UK equities, however it does have the freedom to diversify into international stocks.
At the end of June, the top holdings in the trust included Unilever (4.5%), British American Tobacco (4.5%) and GlaxoSmithKline (4.5%), and the largest international positions were Roche (3.4%), Nordea Bank (3.1%) and Microsoft (2.5%). Sector-wise, the trust had the largest exposure to the financials, consumer goods and healthcare sectors.
Dividends are paid quarterly, and the total dividend paid last year was 32.25p last year, equating to a yield of a healthy 4% at the current share price. The trust has an excellent dividend growth track record, having raised its payout 43 years in a row. Ongoing charges are 0.76%.
Temple Bar Investment Trust
With 33 years of consecutive dividend growth, the Temple Bar Investment Trust (LSE: TMPL) is another trust that could appeal to dividend investors.
Launched in 1926, it aims to provide growth in income and capital, and to outperform the FTSE All-Share Index on a total return basis. The trust invests primarily in UK securities, with the majority of portfolio holdings selected from the FTSE 350 index. The portfolio manager uses a contrarian approach to value investing, seeking out undervalued, out-of-favour companies with strong balance sheets.
At the end of June, the three largest sectors in the trust were financials, cash & short-dated gilts and industrials. The top three holdings were HSBC Holdings (8.1%), GlaxoSmithKline (6.8%) and Grafton Group (5.2%).
Dividends are paid quarterly, and last year it paid out a total of 40.45p, equating to a yield of 3.1% at present. Ongoing charges are 0.51%.
Lastly, the Merchants Trust (LSE: MRCH) is another trust that has a strong focus on dividend-paying companies. Its objective is to provide an above-average level of income, income growth and long-term capital growth by mainly investing in higher-yielding FTSE 100 stocks.
Established in 1889, the trust is managed by Allianz Global Investors, with the portfolio manager often looking to go against the herd and invest in high-quality stocks that are out of favour. At the end of June, the trust had the largest exposure to the financials, industrials and consumer services sectors, and the three largest holdings were GlaxoSmithKline (7.4%), Royal Dutch Shell (7.2%) and HSBC Holdings (5.9%).
The Merchants Trust has the highest yield of the three, with this year’s dividend payment of 24.2p equalling a yield of an impressive 5%. Dividends have been increased for 35 consecutive years and are paid on a quarterly basis. Ongoing charges are 0.58%.
I plan to retire earlier than my parents. How about you?
The Motley Fool recently published a brand new exclusive early retirement report called The Foolish Guide to Financial Independence. If retiring early is a goal of yours, I'd highly recommend reading the report.
It's FREE, comes with no obligation and can be downloaded within seconds simply by clicking here.
Edward Sheldon owns shares in GlaxoSmithKline and Royal Dutch Shell. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended HSBC Holdings and Royal Dutch Shell B. 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.