Defence hero

Driven by soaring defence spending in Europe, QinetiQ (LSE:QQ.) is being tipped for strong and sustained growth by City brokers.

An 18% bottom-line rise is tipped for this financial year (to March 2026). This leaves the company trading on a forward price-to-earnings (P/E) ratio of 15.7 times, which is significantly below those of FTSE 100 defence players like BAE Systems and Rolls-Royce.

This also leaves QinetiQ shares on a rock-bottom P/E-to-growth (PEG) ratio of 0.9. It also means annual dividends are tipped to jump 8% year on year, leaving a 2% dividend yield.

Why is the company so cheap, you ask? A March profit warning, in which the firm advised of severe pressures in the US, spooked investors as uncertainty remains over Washington defence budgets. This remains something investors should keep an eye on.

Yet, on balance, I believe this threat is more than baked into the cheapness of QinetiQ’s share price. I also believe that, on balance, the outlook for the FTSE 250 defence star is massively encouraging as European defence budgets boom. Indeed, the company’s order intake hit record levels of £2bn last year, helped by its robust relationships with the UK Ministry of Defence.

Emerging market star

Lion Finance (LSE:BGEO) has been one of the FTSE 250’s strongest performers in 2025. Yet, it still offers excellent all-round value, with a forward P/E ratio of 5.8 times and a bulky 4.1% dividend yield.

The company’s cheapness compared with other UK banks reflects its unique geographic footprint. As well as offering significant exposure to Georgia, it has a substantial operation in Armenia and a smaller one in Belarus. These regions are no strangers to political turbulence, which continues to this day.

But the rapid pace at which profits are growing still makes Lion worth a close look, in my view. Its operating income grew 9.5% between January and June while profit leapt 28%.

City analysts expect annual earnings per share to drop 18% in 2025. However, this reflects exceptional gains the year before that distorted earnings. Indeed, the number crunchers predict the bank’s impressive long-term growth story to resume, driven by strong economic growth across its markets.

Bank on it

The Bankers Investment Trust (LSE:BNKR) offers a way for investors to target growth and income at significantly lower risk. You see, it holds shares in roughly 100 different companies from across the globe and different sectors:

This diversified approach protects overall returns from individual company, industry, or regional shocks. And pleasingly, this hasn’t come at the expense of returns — since 2015, it’s delivered an average annual return of 11%.

That’s roughly double the return that the broader FTSE 250’s delivered in that time.

Bankers has achieved this through a combination of capital gains and dividend income. Indeed, yearly dividends here have risen every year for more than 50 years. That’s despite its high weighting of tech growth shares, which can impact returns during economic downturns.

Today, the trust trades at a 9% discount to its net asset value (NAV) per share. This makes it worth serious consideration, in my view.

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With this in mind, here are two top, balanced trusts worth serious consideration right now.

Global dividend trust

Through a combination of share price gains and dividend income, the Bankers Investment Trust (LSE:BNKR) has delivered an average annual return of 11% over the last 10 years.

To put that into context, the FTSE 100‘s delivered a 7% return on the same basis. The FTSE 250 index of mid-cap growth shares produced a 5% average return.

Bankers could be an especially great trust to consider for investors leaning more closely towards dividends. It targets payout growth “greater than inflation, as measured by the UK Consumer Prices Index“, and has raised cash rewards for 58 consecutive years.

The trust’s portfolio comprises roughly 100 global shares, and has significant holdings in technology shares such as Microsoft, Amazon, Apple and Alphabet.

This provides significant growth potential as the digital economy rapidly grows. In total, around 32% of the fund is tied up in tech stocks. But remember that this high weighting could cause Bankers to underperform during economic slowdowns.

High yield growth trust

The JP Morgan Global Growth & Income (LSE:JGGI) trust has performed even more strongly over the last decade. Since summer 2015, it’s provided an average annual return of 17.1%.

As a consequence, it’s comfortably achieved its goal of providing better returns than the MSCI All Country World Index. The total return here sits way back at 10.5%.

This JP Morgan investment trust doesn’t have the stunning dividend growth record of Bankers. Cash rewards fell sharply in 2016 after it reset its payout policy, reflecting plans to deliver dividends totalling 4% of its net asset value (NAV).

But dividends have grown strongly since then, and the revised policy means the trust beats most UK shares on yield.

Like Bankers, it holds a high proportion of US tech shares. This leaves it vulnerable to a slowing global economy, as well as a prolonged market shift from Wall Street equities to non-US stocks.

UK dividend trust

City of London Investment Trust (LSE:CTY) has also raised dividends consistently for more than half a century. They’ve grown every year since 1966, to be exact.

Combined with share price gains, this means over the last decade the trust’s delivered an average annual of 10.6%. I strongly believe returns could substantially improve over the next 10 years as broader demand for UK shares continues to pick up.

You see, City of London is focused on blue-chip companies from Britain’s stock market. These make up around 93% of the entire portfolio, in fact, with major holdings including HSBC, BAE Systems, Shell and Lloyds.

This geographic allocation creates more regional risk than those other global trusts I’ve described. But it also provides the potential for greater returns if the recent shift from US equities to UK stocks continues.

The post Seeking growth AND dividends? 3 investment trusts to consider in August appeared first on The Motley Fool UK.

Handy Murray

As its name implies, the Murray Income Trust (LSE:MUT) is a true hero for investors seeking a large and growing passive income. And today it can be picked up at very low cost.

At 854p per share, it trades at a 9.6% discount to its net asset value (NAV) per share:

Dividends at Murray Income have grown for 51 consecutive years. But unlike some of the UK’s dividend growth trusts, the yields here are far from disappointing. For this year it sits at 4.8%, far ahead of the FTSE 100‘s 3.4% average.

It’s able to do this thanks to a focus on a range of income-paying UK blue chip shares. Prominent holdings include Unilever, RELX, AstraZeneca and National Grid.

This cross-sector exposure provides added strength, though remember that its focus on British stocks creates regional risk. Murray Income’s delivered an average annual return of 4.9% since 2015.

Take it to the bank

At 116.4p per share, the Bankers Investment Trust (LSE:BNKR) trades at a 9.5% discount to its estimated NAV per share. For investors seeking to effectively diversify their holdings, I think it’s worth serious consideration.

In total, this investment trust has holdings in 101 different companies spanning the globe. As you can see below, it’s pretty well diversified by sector and geography, although a large weighting of US tech stocks provides it with enormous growth potential as the digital economy booms:

According to its website, Bankers Investment Trust is set up “to achieve capital growth in excess of the FTSE World Index and dividend growth greater than… the UK Consumer Prices Index.” It’s done a pretty good job of this, with dividends rising for 58 years on the spin.

Total annual returns here have averaged 7.9% since 2015. While an economic slowdown could impact its tech holdings, I think it’s still a great trust to consider, and especially at today’s prices.

Rock solid

Investing in the BlackRock World Mining Trust (LSE:BRWM) carries more risk today. As the name implies, 100% of its holdings operate in the cyclical world of commodities production.

Not only this, but the industry it’s focused on is prone to significant unpredictability. Disappointments can be common at the exploration, mine construction and production phases, meaning sales and cost projections can fluctuate wildly.

But with holdings in more than 60 different mining companies — including diversified heayweights Rio Tinto, BHP and Glencore — it effectively spreads this risk out. Its wide wingspan also provides protection from localised issues in specific commodity markets and countries (almost 60% of its holdings operate across the world):

At 517p per share, the BlackRock World Mining Trust trades at a 6.5% discount to its NAV per share. Delivering an average annual return of 9.8% since 2015, I think it’s worth a serious look today.

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With a SIPP, I have an opportunity to invest up to £60,000 each tax year, according to what I earn. I also have a wider range of investments to choose from with one of these products than with an ISA.

The big deal for me though, is the enormous tax relief investors enjoy. For every £1,000 I invest, the government will add another £250.

Higher- and additional-rate taxpayers can enjoy even bigger benefits too. People in these brackets can enjoy tax relief of up to 40% and 45% respectively.

Please note that tax treatment depends on the individual circumstances of each client and may be subject to change in future. The content in this article is provided for information purposes only. It is not intended to be, neither does it constitute, any form of tax advice. Readers are responsible for carrying out their own due diligence and for obtaining professional advice before making any investment decisions.

The quest for dividends

In recent weeks, I’ve bought Legal & General, CRH and Ashtead Group shares for my SIPP. I’ve also included a couple of funds, including the HSBC S&P 500 UCITS ETF (which tracks the S&P 500 stock market index).

I bought Legal & General shares to give me extra passive income to buy more shares. The forward dividend yield here sits at an enormous 8.6%, and I’ve my eye on several other dividend stocks to help me build out my portfolio.

I’m reluctant to invest in banks like Lloyds and NatWest due to the UK’s gloomy economic outlook. But buying TBC Bank Group (LSE:TBCG) helps me sidestep this problem.

This FTSE 250 share is focused on the rapidly expanding emerging market of Georgia. So it has strong growth potential. Like all banks, it also has reliable income streams from loan interest which it can use to pay dividends.

Of course, Georgia’s economy isn’t immune to downturns. This means TBC is also vulnerable to bouts of profit volatility. But a robust long-term outlook still makes the business an attractive investment to me.

GDP per capita is tipped to rise strongly to the end of the decade, as the chart above shows. As a consequence, I expect TBC to keep delivering a large and growing dividend as demand for financial services steadily increases.

As for 2024, the bank currently offers up a giant 8.1% dividend yield.

Bank on it

Bankers Investment Trust (LSE:BNKR) is another share I’m hoping to add to my pension soon. It’s paid an annual dividend every year since the late 1890s! And it’s increased them without a break for the past 57 years.

The trust invests in some of the world’s largest companies which, in turn, gives it excellent stability and thus the ability to pay dividends every year. Some of its biggest holdings include Microsoft, Accenture, Toyota and American Express.

Bankers is also robust because of its highly diversified portfolio. The company spreads its capital across a broad range of regions and sectors, as the graphic below shows.

The trust does have a significant weighting to cyclical sectors like technology, industrials and financials however. This means it could deliver worse returns than other trusts during tough economic times.

But as a long-term investor, this doesn’t put me off. Bankers’ exceptional dividend record makes it a top buy for a SIPP. For this financial year, it carries a handy 2.3% dividend yield.

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Investing is always going to be a long-term thing for me, so I buy stocks I’m happy to hold for at least 10 years.

But for a SIPP, that’s even more important, right? The clue is in the name. It’s hard to think of a longer lifetime investment than a pension. And I think there’s one class of investment that could be perfect for the job — investment trusts.

City of London

I bought some City of London Investment Trust (LSE: CTY) shares some time ago. It’s one of the ‘Dividend Heroes’ picked by the Association of Investment Companies, which has raised its dividends for at least 20 years in a row. City of London tops the list with a 57-year record.

The trust targets UK equity income, and it’s currently on a dividend yield of 5.2%.

It holds stocks such as Shell, BAE Systems and Unilever. It’s basically a collection of what I consider the FTSE 100‘s safest stocks.

With such a track record, there’s a risk the share price could plunge should the dividend increase not happen one year. And investment trust share prices can be more volatile than the stocks it holds.

Still, City analysts expect FTSE 100 dividends to rise this year, and to set a new all-time record in 2024.

Bankers

Adding a bit of global diversification can’t be a bad thing. So my next suggestion is Bankers Investment Trust (LSE: BNKR), which aims for a mix of capital growth and dividend income from some of the world’s biggest companies.

Microsoft and Apple are its current top two holdings. But it also has JPMorgan Chase, UnitedHealth Group and Toyota Motor Corp in its top 10. There’s a lot of global powerhouse going on there.

There’s some tech stock risk, which I think could be the biggest danger. Investment trusts can lurch between trading at a premium and at a discount, which can mean volatility.

Still, it does hold second place among those Dividend Heroes, with 56 years of straight raises. The yield is a fairly modest 2.5%, but capital gains should be better.

I don’t hold any bankers shares in my SIPP yet, but it’s on my wanted list.

Scottish Mortgage

I’ll finish with Scottish Mortgage Investment Trust (LSE: SMT). I pick this one because I reckon a fair number of SIPP investors will surely want to grab a part of world technology growth.

It would be a shame to reach pension age and have let the likes of ASML, Moderna, Nvidia and Tesla pass me by. Those are the trust’s top four holdings.

I think the risk here’s clear. All we need to do is look at the way the US Nasdaq index slumped in 2022. Nasdaq stocks can be very volatile.

But I see Scottish Mortgage as a way to put a small portion of my SIPP money into them, and be able to switch off and forget.

Right now, it trades at an 18.5% discount. And it’s even raised its dividend for 41 years in a row — albeit with a tiny 0.6% yield.

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Unlike other investment vehicles, these companies do not have to pay out all of the income they receive from their portfolios each year. They can hold 15% back in reserve.

This means they can hold back some of the income they receive in good years and use it to boost dividends when businesses may be cutting theirs.

This structural advantage gives investment trusts a unique quality. It also means they have been able to pay consistent dividends through both the good and bad times. 

This quality is the main reason why I believe investment trusts deserve a place in my passive income portfolio. With that in mind, here are two trusts I would buy for income right now. 

Investment trusts for income 

The first on my list is the City of London Investment Trust (LSE: CTY). This firm has one of the longest track records of consistent dividend increases in the investment trust space. It has continually increased its payout for 55 years.

The portfolio is concentrated in a diverse basket of London-listed equities. At the time of writing, the stock supports a dividend yield of 4.8%.

A downside of using investment trusts to invest for income is they tend to charge an annual management fee. In this case, it’s nearly 0.4%. This charge could eat into investor returns in the long run.

There will also be a chance the manager could pick the wrong investments, incurring losses for my portfolio. 

Even after taking these factors into account, I would buy the City of London for my portfolio as an income investment today. 

Passive income play 

While City of London has a UK focus, the Bankers Investment Trust (LSE: BNKR) has a more diverse focus. 

Like City, Bankers has also been paying and increasing its dividend for 55 years. At the time of writing, the stock supports a dividend yield of 2%. It has an annual management charge of 0.5%. 

Some of the most significant holdings in the portfolio are international growth and income giants. The largest is technology group Microsoft. The trust has made a trade-off here. Rather than focusing on income alone, it focuses on income and growth, which has produced better capital returns in the long run. 

Still, Bankers’ focus on growth stocks rather than income plays alone could expose me to more volatility. If these companies do not live up to the market’s lofty growth expectations, they could underperform and hit the trust’s returns.

The focus on growth and the lower yield are the reasons why I would own this company alongside the City of London. I think the two corporations complement each other perfectly. 

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Here, I’m going to highlight two investment trusts I’d buy for both income and growth. Both of these trusts have delivered strong capital gains over the long term along with rising dividends. 

A top investment trust for income and growth

One investment trust I’d be happy to add to my portfolio for both income and growth is Bankers (LSE: BNKR), which was incorporated all the way back in 1888. Its aim is to achieve capital growth in excess of the FTSE World Index and dividend growth greater than inflation over the long term. Janus Henderson is the trust’s investment manager. 

Bankers Investment Trust has delivered impressive long-term results on both the income and growth fronts. On the income side, it has now delivered 54 consecutive dividend increases. As a result of this track record, it is classified as a ‘Dividend Hero‘. Currently, the yield is a little under 2%.

Meanwhile, on the growth side, performance has been strong. For the five years to 30 June, the trust’s net asset value (NAV) increased 99%. By contrast, its benchmark, the FTSE World Index, returned 88%.

This trust owns some great companies. Names such as Microsoft, Visa, and American Express are currently in the top 10 holdings. One risk to consider here, however, is that the trust is currently quite heavily weighted to two very cyclical sectors – industrials and financials. If economic conditions deteriorate, it could underperform.

Ongoing charges are a reasonable 0.5% per year.

Growth and dividends: a winning combination 

Another trust I’d buy for income and growth is the Alliance Trust (LSE: ATST). It aims to include core equity holding for investors that deliver a real return over the long term through a combination of capital growth and a rising dividend. It invests primarily in global equities across a wide range of industries and sectors. 

This trust has a unique investment process. Its investment manager, Willis Towers Watson, has appointed a number of stock pickers with different styles, who all ignore the benchmark and buy a small number of stocks in which they have a strong belief. The result is that investors enjoy both highly-focused stock picking and increased diversification.

Long-term performance here has been very good. For the five years to 31 July, the trust delivered a total shareholder return of 95%. By contrast, the MSCI ACWI index delivered a total return of 82%.

It also has a good long-term dividend track record. Like Bankers, it is a Dividend Hero. Currently, its yield is about 1.4%.

I really like the portfolio here. Top holdings at the end of July included Alphabet (Google), Microsoft, and Visa. One risk to consider, however, is that it has a bias towards the technology sector. If tech stocks fall, this trust could underperform.

Ongoing charges are around 0.65% per year.

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Here, I’m going to highlight two top growth-focused investment trusts I’d be happy to buy for my own portfolio today. Both own a selection of world-class companies and have strong long-term track records.

A top growth investment trust for 2021

One investment trust I hold in high regard is Monks (LSE: MNKS). It’s an under-the-radar offering from Baillie Gifford – the investment manager that runs the highly popular Scottish Mortgage Investment Trust. The aim of this trust is to generate capital growth over the long term by investing in global equities.

What I like about Monks is that it has a very well diversified portfolio. Unlike SMT, it doesn’t take large bets on higher-risk stocks. This reduces risk significantly. This is illustrated by the fact that while SMT is down about 8% this year after the tech stock sell-off, Monks is flat. Having said that, SMT has been the stronger performer over a 12-month time horizon, returning 114% versus 82% for Monks.

There are currently some great stocks in Monks’ portfolio. At 31 January, Alphabet, Amazon.com, and Microsoft were all top-10 holdings. This investment trust isn’t solely focused on tech stocks though. You’ll also find companies such as insurer Prudential, alcoholic beverages giant Pernod Ricard, and make-up powerhouse Estee Lauder in the portfolio.

Of course, there are risks to consider here. One is the trust has a bias towards US stocks. At 31 January, nearly 50% of the trust was in US stocks. If they underperform, the trust could underperform.

However overall, I think this is a fantastic growth-focused investment trust. With ongoing charges of just 0.48% per year, I see this trust as a great way to get global equity exposure.

Capital growth and income

Another investment trust I like is Bankers (LSE: BNKR). It’s also a global equity-focused product. This trust was launched all the way back in 1888, so it’s fair to say it’s been established for a while.

While Bankers has a focus on growth, it also aims to provide a bit of dividend income too. Currently, it offers a yield of around 2%. It’s worth noting this trust is part of an elite group known as ‘AIC Dividend Heroes’. These are trusts that have consistently increased their dividends for at least 20 years in a row. Bankers is actually the joint record-holder for consecutive annual dividend increases with 54 registered.

Like Monks, this investment trust owns some great stocks. Top holdings include the likes of Microsoft, Mastercard, and Visa. Performance hasn’t quite been as strong as that of Monks. Over the last 12 months, the trust has ‘only’ returned about 42%. However, it’s worth noting that during last year’s stock market crash, this trust held up better than Monks.

One risk to consider is it has quite a high exposure to the financial sector (nearly 25%). If this sector underperforms, it could impact the trust’s performance.

Overall however, I see this as a very solid growth-focused investment trust. Ongoing charges are a very-reasonable 0.50% per year.

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Investment trusts offer several important benefits, in my opinion. One is I get to spread a modest sum across a range of actively-managed investments, without worrying about any conflict of interest. Buying the shares makes me a part-owner of the trust, and so its managers are working directly for me.

The other key thing I like is the way investment trusts can manage their dividends. Being able to retain up to 15% of their income in any year, they can build a reserve. And that helps to maintain long-term dividend stability.

Investment trust dividend heroes

I do already hold one, the City of London Investment Trust (LSE: CTY), and it’s just released first-half figures. The Association of Investment Companies (AIC) ranks City of London at the head of what it calls its ‘Dividend Heroes’. That includes all investment companies that have raised their dividends for 20-or-more-years in a row. City of London is in joint first place with Bankers Investment Trust (LSE: BNKR), achieving the feat for 54 consecutive years.

At December 2020, the former trust’s net asset value (NAV) per share stood at 357.4p. That’s up from 344p at 30 June.

Market sentiment appears to have improved. In June 2020, City of London shares were trading at a 1.2% discount to NAV. But the price has picked up since November and, by the end of 2020, it had moved to a 3.7% premium. I still think that’s reasonable value.

55 years of dividend hikes?

But what of my precious investment trust dividends? The company said it’s “confidence that it will be able to increase the dividend for the fifty-fifth consecutive year.” Saying that, the trust did suffer a significant fall in income in 2020, with its revenue earnings per share falling by 15.6%. It’s very tightly tied to the UK market too, so any prolonged economic downturn could hurt both the dividends and the share price.

So, for my next pick, I’ll try to balance my risks. I’m turning back to Bankers Investment Trust. And not just for those 54 years of dividend hikes. While City of London is focused on UK equities, Bankers sets its sights globally. That suits me personally for a couple of reasons. Firstly, I like a bit of global diversity. And, secondly, a chunk of my retirement income is going to be spent overseas, so it might help not to be totally tied to the UK economy.

That would expose me to risks associated with other parts of the world too. And, in many places, markets can be more volatile and subject to weaker regulation. But those are risks I’m prepared to take to fit my personal requirements.

Income vs growth

The dividend yield is only around 2%. But the Bankers Investment Trust share price is up 9% over the past 12 months (while City of London is down 17%, and the FTSE 100 has fallen 10%). Over five years, Bankers shares have more than doubled in price.

Right now, there’s only a modest premium to NAV, at just 0.6%. For my personal circumstances, I think these two really could be the best investment trusts I could buy in 2021.

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A quarterly dividend to help with passive income

Merchants Trust (LSE: MRCH) was doing well until Covid-19. This is especially true when you consider that it’s an income-focused trust holding many big names that weren’t flavour of the month. The shares even traded at a premium to their net asset value (NAV). Covid-19 changed this. The shares are now back trading at a small discount of around 3.5% to NAV. Even better for income investors, the dividend yield is over 7%.

The big question is, can this be sustained?

Management are certainly keen to keep the trust’s status as a ‘dividend hero’, a trust that has kept consecutive years of income rises. The trust plans to dip into its savings to protect shareholder payouts this year.

However, this is not sustainable. What is needed is for companies to reinstate their dividends so the trust doesn’t deplete its reserves to pay for the dividend in the short term.

I’m confident this will happen. I would buy Merchants Trust to create a passive income as it holds many dividend-paying companies. The top holdings are GlaxoSmithKline, British American Tobacco, Imperial Brands, BHP Group, and National Grid.

Getting growth from high-flying US tech stocks 

The Bankers (LSE: BNKR) investment trust gives investors something a little different. It has very different holdings than Merchants, with much more of a tilt towards the high-flying, in-favour US tech stocks. Top holdings include Microsoft, Amazon, and Visa.

As a result, the trust has a much lower dividend yield. It currently provides investors with a yield of 2%. The shares in the trust also trade a premium to NAV of around 1.5%. This then is no hidden gem or recovery play. The trust’s shares will need to stay in demand if the share price is to keep going higher.

From a passive income point of view though, it complements Merchants well, as a very different type of trust. The trusts both pay dividends quarterly giving investors a regular cash flow.

I’m pleased to see the Bankers dividend has been rising steadily for the past two decades and I expect this can continue. If the shares fall to a discount to NAV I would be even more tempted to pick some up. It provides both income and growth potential. 

If you wanted to invest directly, companies such as GlaxoSmithKline also pay their dividend quarterly. Biannual dividend payments are far more common. This could also help make sure you can create a passive income while diversifying your investment portfolio.

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