Aberdeen Asian Income Fund (LSE: AAIF) stands out on both fronts. It offers a chunky 7% yield, backed up by 16 years of continuous dividend increases and an average annual growth rate of 22%. Better still, its payout ratio of 67% suggests that the dividend is comfortably covered.

This puts it ahead of many other income-focused investment trusts. For example, the Value and Indexed Property Income Trust yields a solid 6.6% and boasts an even longer 19-year growth streak. But its 96% payout ratio and much slower 4.5% growth rate make me less confident about its future increases. Aberdeen Equity Income is another option, but in terms of both growth and yield, Asian Income looks more compelling.

So, what exactly does Aberdeen Asian Income invest in?

Asian market diversity

As the name suggests, it focuses on dividend-paying companies across Asia, with a well-diversified portfolio spanning Taiwan, China, India, South Korea, and Singapore. Top holdings include some of the region’s most established businesses, such as TSMC, DBS, Tencent, and Samsung. Management takes a quality-over-quantity approach, focusing on companies with strong balance sheets, reliable cash flow, and a long-term track record of shareholder returns.

While its share price has only climbed 21% over the past five years, the total return including dividends is 60.8% — well ahead of the MSCI Asia Pacific benchmark. It’s not a growth rocket, but as a steady income stock, it has delivered impressive results.

Valuation and costs

On a valuation basis, the trust looks reasonable, with a price-to-earnings (P/E) ratio of 10.46 and a price-to-book (P/B) ratio of 0.89. Its financials are also reassuring: a 35% free cash flow margin, 8.8% return on capital employed (ROCE), and a strong balance sheet with £416m in assets versus just £38.9m in liabilities.

But investors should be aware of the discount and fees. The shares have consistently traded at 10% to 15% below net asset value (NAV) for the past year, which may reflect broader caution around Asian equities. The trust also incurs an ongoing fee of 0.85%, which is slightly below average for APAC equity funds but can still nibble away at net returns over time.

Broader Asian market outlook

The fund’s future naturally relies on growth in the broader Asian market. In light of this, there are some encouraging signs, including easing tensions between the US and China and improving trade conditions. 

However, geopolitical risk remains elevated. Any escalation in Taiwan or instability in the region could weigh on sentiment. Currency fluctuations and regulatory differences also add complexity.

My verdict? While Aberdeen Asian Income ticks a lot of boxes as a dividend yield play, I’m not convinced. It’s well-managed, diversified, and has a consistent track record of growth. But the high fees and uncertain outlook for Asian equities mean I’m not rushing in.

I think it’s worth a look for investors specifically seeking Asian market exposure — but for me, I think there are better income options closer to home.

The post A well-covered 7% dividend yield and 16 years of growth! Is this the best income stock in the UK? appeared first on The Motley Fool UK.

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With investments diversified across various industries and regions, localised losses are minimised. And in many cases, they’re offset by gains made in other areas.

With an investment trust, it’s possible to diversify into an unknown region or unfamiliar industry. Rather than learning about an entirely new market, investors can let the trust do the hard work.

Here are three UK investment trusts investors may want to consider as a way to diversify an ISA account.

The best of the West?

Scottish Mortgage Investment Trust (LSE: SMT) is a is a popular option for investors seeking US tech stock exposure. Despite the name, it leans far more heavily towards US tech stocks than anything based in Scotland.

Some of its largest holdings include Nvidia, ASML, Amazon and Tesla. A few non-tech holdings include Moderna, Ferrari, and Ocado. In this way, it provides exposure to both the UK and US markets and diverse industries like healthcare, retail and luxury goods.

However, the price has been volatile. In 2020 it climbed 112% only to collapse by 46% in 2022, making it less attractive to risk-averse investors. Still, it’s up 315% in the past 10 years, delivering annualised gains of 15.3% per year. Its price-to-earnings (P/E) ratio is still low at 8.5, giving it room for more growth.

Eastern exposure

abrdn Asian Income Fund (LSE: AAIF) primarily invests in Asia Pacific securities with higher-than-average dividend yields. This makes a great income stock for those looking to compound returns and save for retirement. Some of the top 10 holdings include TSMC, Samsung, BHP and Rio Tinto.

While some Asian markets have struggled to recover since Covid, abrdn Asian has faired better than most, up 8% in the past year. But slow earnings have pushed its P/E ratio up to 39.4, more than double the industry average. As such, I wouldn’t expect a lot of growth from the shares.

Fortunately, it has a 5.5% dividend yield that’s well above the FTSE 100 average of 3.5%. This makes it a solid earner even if the price remains stagnant. Being an Asia-focused trust, it’s at risk from issues like the US-China trade war and a sluggish post-Covid economy.

Something closer to home

BlackRock Greater Europe Investment Trust (LSE: BRGE) focuses on stocks in Europe, including some of our best homegrown companies like RELX. This protects against issues such as the recent market slump following comments from US politicians regarding Taiwan and the export of semiconductor technology to China.

With holdings including Novo Nordisk, ASML, Ferrari and LVMH, there’s a good mix of healthcare, tech and luxury stocks. The stock price was also hit by the 2022 economic downturn but has made a spectacular recovery, climbing 43% in the past two years. And with a P/E ratio of 5.3, the shares still look cheap to me.

Naturally, the stock is at risk from any localised issues affecting the European economy. The ongoing Ukraine-Russian conflict and knock-on effects from the war in Israel are two such examples. It also comes with a higher-than-average annual charge of 0.98%, so this will eat into any returns. 

The post 3 global investment trusts for maximum diversity in a Stocks and Shares ISA appeared first on The Motley Fool UK.