The Motley Fool

2 top investment trusts that could help you retire

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.

Models of houses on top of pound coins
Image source: Getty Images.

Today I’m looking at two real estate investment trusts I’d consider buying for a retirement income portfolio.

Although the property market is cyclical, well-run property firms can provide a reliable long-term income. Both of the trusts I’m looking at here continued paying dividends throughout the financial crisis, albeit at a reduced level.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

An overlooked dividend champion?

Commercial property group McKay Securities (LSE: MCKS) is a name you may not be familiar with. This £250m investment trust specialises in office and industrial property in London and the south east of England.

McKay’s share price rose by nearly 3% in early trade today, after the group said its adjusted pre-tax profit rose by 5.4% to £9.07m last year. Gross rental income climbed 5.1% to a new record of £21.84m, and the trust’s net asset value per share rose by 6.3% to 322p. This means that at the last-seen share price of 278p, the shares trade at a tempting 15% discount to their net asset value.

Dividend growth was also ahead of expectations. The full-year dividend has been lifted 11% to 10p, ahead of broker forecasts for a payout of 9.2p per share.

Why I’d buy

This company isn’t involved in the retail sector, where landlords are starting to see downward pressure on rents.

Demand for office and industrial property such as warehouses still appears to be strong. The trust reported a “record year of lettings”, with a 23.3% increase in contractual rental income on a like-for-like basis. Debt levels are also reasonably conservative, with a loan-to-value ratio of 31.9%.

The current market strength probably won’t last forever. But this looks to me like a well-run business at a reasonable valuation. The shares’ 15% discount to book value is paired with a dividend yield of 3.6%.  I’d consider buying at these levels.

The best long-term income stock?

If you’re building a retirement portfolio, you might prefer to focus on stocks from the larger end of the market. One of the UK’s largest and oldest real estate investment trusts is FTSE 100 member British Land Company (LSE: BLND).

This £6.8bn group operates a mix of office and retail property, much of which is in prime locations in London and at major retail sites around the UK. Last week’s full-year results suggest that despite the problems being experienced by some major retailers, the group’s properties are holding their value so far. Property values rose by an average of 2.2%, while a £300m share buyback helped lift net asset value per share by 5.7% to 967p.

Underlying profit fell by 2.6% to £380m during the year to 31 March, as property sales put a dent in the group’s rental income. But the dividend rose by 3%, giving the stock a tempting yield of 4.3%. And the last-seen share price of 690p means that the stock trades at a discount of nearly 30% to its book value.

A buy for income?

I think that the pressure on retailers and retail landlords could continue for some time. But the group looks well positioned to handle this. Nearly 40% of its rental income comes from offices, and its retail sites are generally major shopping centres such as Meadowhall and Ealing Broadway.

The stock offers a forecast yield of 4.5% for the current year, and trades at an attractive discount to book value. I’d rate British Land as a long-term income buy.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended British Land Co. 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.