Even though equity investment trusts have been superseded by cheaper, more efficient tracker funds, open-ended investment companies, and unit trusts, mean the structure of these investment companies, unlike most other funds, they are not limited to where they can invest.

This model means that there are some very eclectic trusts out there which give investors exposure to all kinds of different assets offering market-busting dividend yields and diversification. Here are two such opportunities. 

Income from lending 

The aim of the Honeycomb Investment Trust (LSE: HONY) is “is to provide shareholders with an active level of dividend income and capital growth through the acquisition of loans made to consumers and small businesses as well as other counterparties.“

This strategy might seem risky at first, but the team behind the firm is extremely experienced. They have decades of experience and the loans are high quality. 

For example, three portfolios of 40,000 loans acquired in the second quarter had an average outstanding loan amount of £4,190. For the first half, the trust reported investment income of £13.3m, an increase of 161% on investment assets of £300.2m. At the time of its IPO, Honeycomb stated that it was targeting a dividend yield of 8% on its initial listing price of 1,000p. Since listing, it has outperformed this target, achieving an average annualised yield of 9%.

Year-to-date, the trust has paid out 48p per share in distributions and is in line to payout a total of 96p – giving a yield of 8.1% at the current share price. The net asset value per share was 1,018p at the end of Septemeber. 

Income from unloved property 

If Honeycomb isn’t for you, Aew UK (LSE:AEWU) might be of more interest. 

Aew invests predominantly in a portfolio of smaller commercial properties around the UK. These properties might not interest the likes of Land Securities, but they’re still interesting investments. 

With a net asset value of £120m, and gearing of 22%, the firm is currently producing a dividend of 8p per annum for a dividend yield of 7.9% at the time of writing. For the three months to the end of July, Aew generated £3.3m in income from operations, easily covering the dividend for the period of £2.5m. 

To help fund the expansion of the trust’s portfolio, management recently conducted a fundraise by way of a placing. Net proceeds were £27.5m, which will allow property managers to acquire new, high-quality assets to support dividend growth yet further. The company is looking to raise a total of £40m-£60m over the rest of the year to buy more assets. Management has a record of creating value, so it looks as if this cash call is the right decision. 

Aew recently sold Valley Retail Park in Newtonabbey, Belfast, for £11.1, making a return of £4m after buying it for £7.1m in 2015. 

The post 2 top-performing investment trusts with dividends yielding 7% appeared first on The Motley Fool UK.

As such, I’m considering these two high-yielding investment trusts to add yield to my portfolio.

Consumer loans

Investing in consumer loans is one answer to beating low interest rates and one easy way to get access to the growing consumer loan market is simply to invest in a fund such as the Honeycomb Investment Trust (LSE: HONY).

The £300m fund targets annual returns on loan investments in excess of 10% — and that’s after allowing for loan losses. With such attractive potential returns, it is backed by leading investors, which include Invesco Perpetual’s Mark Barnett and Woodford Investment Management’s Neil Woodford.

Honeycomb has only been operating since December 2015, but in that short time period it has delivered significantly higher returns than its better-known peer P2P Global Investments. Since its inception, Honeycomb has delivered total NAV returns of 15%, while P2P returned just 7% over the same period.

The gap in the performance of the two alternative credit investment trusts is explained by P2P’s global diversification, which has exposed it to rising default rates in the US and increasing currency hedging costs. Meanwhile, Honeycomb has benefitted more from favourable market conditions in the UK, because unlike its larger globally diversified peer, the fund is primarily UK-focused.

On the downside, shares in the Honeycomb trust trade at 15% premium to its net asset value, while most of its peers trade at a modest discount. Nevertheless, at today’s share price, Honeycomb still yields an impressive 7.7%.

The fund has a management fee of 1% and there is also a 10% performance fee subject to a 5% preferred return hurdle and high watermark.

Renewable energy

Infrastructure is another popular alternative asset class for investors looking to generate income. Their popularity with pension and sovereign wealth funds is well-known, but it’s not just big institutions that can invest in them. There are a number of infrastructure investment trusts on the market today, including a few invested in renewable energy assets.

The Bluefield Solar Income Fund (LSE: BSIF) is one of the biggest solar investment trusts, with a total net asset value of roughly £400m. It invests primarily in large ground-based solar energy assets in the UK, and has a total generating capacity of 441.5 megawatts.

With physically-backed assets and revenues largely uncorrelated to traditional markets, investing in renewable energy projects can offer investors stable, long-term returns. At today’s share price, the fund has a current dividend yield of 6.4%, with Bluefield Solar Income Fund now trading at a premium to its net asset value of 4%.

But although its income prospects are certainly tempting, investors should not expect too much on the capital growth front. The fund pays out nearly all of its earnings as dividends, meaning new investments are primarily funded by raising fresh equity and borrowings.

The post 2 high-yielding investment trusts for income investors appeared first on The Motley Fool UK.

Attractively valued

The update tells us that Woodford has taken advantage of recent share price weakness to increase his holding in troubled retailer Next (LSE: NXT). It’s a stock he first bought after launching his equity income fund in June 2014. He added on several occasions last year as the shares went into decline and his latest buying represents a further ‘averaging down’.

The shares are now at levels not seen since 2012, with the latest hammering coming as a result of another profit warning, issued on 4 January.

Woodford and his team confess that the challenges of cost inflation and the growing threat from online rivals “have been causing more of a problem for Next than we had expected”. Nevertheless, Woodford remains bullish on this “extremely well-managed, disciplined company with a well-invested asset base and healthy cash generation”.

Next returns most of its free cash flow to shareholders and will be paying a series of special dividends this year. At a current share price of 3,827p, giving a 12-month forward P/E of just 9.5 and a forecast dividend yield of 4.1%, I agree with Woodford that “its shares continue to look attractively valued”.

An 8% yield

From a high street stalwart known to everyone to a little investment trust that I imagine few readers will have heard of. Certainly, I hadn’t come across Honeycomb Investment Trust (LSE: HONY) before reading that Woodford has taken a “new, albeit small position” in it.

The trust was launched in December 2015, targeting a 10%+ annual return and a mammoth 8% dividend yield on the issue price of 1,000p (once fully invested and leveraged) from the acquisition of interests in loans made to consumers and small businesses as well as other counterparties.

The trust fits well with Woodford’s belief in new finance opportunities in spaces that mainstream lenders have vacated or in which they can’t compete. The shares have now risen to 1,075p — a 6% premium to last reported NAV — but the prospective dividend yield is still over 7%, so I imagine the premium won’t put off income-hungry investors. Not one for me but investors seeking a high yield may want to investigate further.

Four more buys

Paypoint (LSE: PAY) is a rather less exotic company in the financial services industry. It operates market-leading payment collection networks across 40,000 convenience stores in the UK and Romania.

Woodford increased his stake in this FTSE 250 firm during January and you can now pick up the shares even cheaper, at 940p. The company has delivered steady growth and the shares look very buyable to me on a 12-month forward P/E of 14.3, with a nice prospective dividend yield of 5.1%.

Elsewhere, Woodford added to small caps Horizon Discovery and Norwegian Idex, as well as blue chip AstraZeneca. The latter is another Woodford favourite that currently sports a nice yield — 4.8%.

The post Neil Woodford adds to Next plc & buys this little obscure investment trust appeared first on The Motley Fool UK.