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Investment trusts can be great income investments. These investment companies can hold back a portion of their income every year and use this to cover their payouts in periods of economic stress.

For example, in 2020, when multiple UK companies had to cut their dividends to preserve cash in the pandemic, many investment trusts could dig into this reserve to maintain and even boost their payouts. 

Leading investment trust 

One of the trusts with the best income track records on the market is the Law Debenture Trust (LSE: LWDB). 

This investment company is one of the top holdings in my Stocks and Shares ISA. It is more than just an investment enterprise. 

As well as owning a portfolio of stocks and shares, the enterprise also owns a corporate and pensions services business. It helps other companies manage their pension infrastructure and their corporate structures. 

This kind of business is relatively sticky. Changing providers can be a time-consuming and complex process. In the meantime, Law Debenture can earn a steady recurring revenue from its clients. 

The group can use revenue from this division to support its dividend and provide funds for the investment portfolio. The structure gives the company a unique edge. Rather than focusing on income stocks, it can take a longer-term view and invest some cash in growth investments.

Indeed, one of the best-performing stocks in its portfolio over the past couple of years is the hydrogen fuel cell group Ceres Power. 

Stocks and Shares ISA holding 

The one downside of the company’s investment strategy is the fact that more than 80% of the portfolio is invested in UK stocks. This could hold back returns if the UK market underperforms global equities over the next couple of years.

It has undoubtedly held back performance in the past few years, as the UK equity market has struggled to match the performance of international peers. This is why I own the trust alongside a portfolio of other international investments in my Stocks and Shares ISA. 

Still, despite this drawback, I think the company offers a unique business model that cannot be found elsewhere.

The investment trust and the operating business combination give the firm plenty of flexibility and extra cash to support the dividend. The stock offers a dividend yield of around 2.8%. The trust also charges a relatively inexpensive management fee of 0.5%. Compared to some funds that charge fees of 1% or more, this appears good value for money. 

The post The investment trust I’m buying for my Stocks and Shares ISA appeared first on The Motley Fool UK.

But I reckon the LWDB share price can keep climbing. The investment trust offers an attractive dividend yield, which income hungry investors, like me, can’t ignore. Here’s why I’d snap up the shares.

The portfolio

LWDB is an investment trust that invests in UK stocks with various market caps. It’s benchmarked against the FTSE Actuaries All Share Index and aims to deliver a higher total return than this.

The 1bn portfolio is typically diversified across 140 stocks. As I mentioned, this is mainly UK shares, of which typically 66% is invested in FTSE 100 companies, 33% in UK mid- and small-cap firms, with the remainder distributed across global companies. This includes North America, Europe, Asia, and the rest of the world where the fund managers believe there are opportunities.

What I really like about LWDB is that the portfolio turnover is low. This means that the fund managers hold onto investments for the long term and aren’t chopping and changing the holdings frequently. According to the investment trust’s factsheet for May, it holds the likes of BP, Royal Mail, and Lloyds.

Fund managers

LWDB is managed by James Henderson and Laura Foll. Both have been working together for over 10 years managing UK equity income portfolios.

The investment pair have developed a contrarian investment style. This means that they will look for out-of-favour stocks that are trading at valuation discounts to their long-term historical average.

The duo are also looking for high-quality companies with strong competitive advantages at attractive valuations. I like that the pair don’t want to overpay for a stock and they invest for the long term.

Performance

The LWDB share price is trading in line with the investment trust’s net asset value (NAV). This mean that I wouldn’t be paying a premium for the stock. It also has an attractive dividend yield of approximately 3.5%.

I’ve looked at the other investment trusts within the UK equity income sector and LWDB has delivered a strong performance versus its peers. Of course, there’s no guarantee this will continue. But it gives me some comfort that the fund managers have a good long-term track record. This is one of the reasons why I think the LWDB share price could climb further.

My view

I think LWDB offers a diversified way to gain exposure to UK stocks and get an attractive income. But there’s no certainty that the investment trust will continue to pay out its generous dividend.

I reckon the LWDB share price has risen as investors are on the hunt for income. Again, there’s no guarantee this trend will continue and it could impact the stock. Investors will also have to pay for the fund managers’ expertise with an ongoing charge of approximately 0.57%.

Despite these risks, as a long-term investor, I think LWDB is a UK equity income investment trust that has a good performance track record. I’d buy the shares.

The post Can the LWDB share price keep climbing? appeared first on The Motley Fool UK.

UK shares to buy

The first is insurance group Admiral (LSE: ADM). I’ve owned this stock in my portfolio for several years and I’ve been adding more recently. 

There are two reasons why I think this company is incredibly attractive as an investment. First of all, it’s one of the UK’s best and most efficient insurance companies. It’s a household name and can process customer queries at a lower cost than any other business in the sector. This is a considerable competitive advantage. 

Secondly, a few years ago, the organisation started to build out its international businesses in Europe and the US. For the past few years these businesses lost money. However, that changed last year. These operations started to contribute to the group’s overall bottom line in 2020. I’m expecting further growth in the years ahead. 

I think this international growth, coupled with its existing UK presence, will help drive Admiral’s dividend and earnings growth in the years ahead. At the time of writing, the stock supports a dividend yield of around 5%. This is based on City analysts estimates, which are subject to change. 

The most considerable risk facing the business is competition. The UK car insurance market is viciously competitive. Admiral has managed to navigate these challenges so far, but that doesn’t mean it’ll continue to do so as we advance. The company may also face challenges from regulators, which could lead to increased costs and reduced profits.

Nevertheless, despite these risks, I’d buy more of this stock for my portfolio of UK shares today. 

Income champion 

The second company I own in my portfolio of UK shares is the Law Debenture Trust (LSE: LWDB). There are two parts to this business. There’s an investment trust and an operation that provides administrative services to other businesses. This second business has historically provided a steady income allowing it to reinvest in its trust and support the dividend.

This was especially important last year. Income from Law Debenture’s professional services business could offset dividend cuts from stocks held in the firm’s investment trust. This allowed management to maintain the dividend for the year as a whole. 

I think this business model provides the best of both worlds. That’s why I own the stock.

However, the company isn’t without its risks. Professional services is a competitive business, and Law Debenture can’t take its position in the market for granted. Its investment managers have also borrowed money in the past to invest in UK shares when prices are depressed.

This strategy has produced results historically, but there’s no guarantee it’ll continue to do so. Borrowing money to invest in the stock market is a precarious strategy. 

Despite these challenges, I’ve bought Law Debenture as a diversified income investment. 

The post UK shares to buy now: my top 2 stocks appeared first on The Motley Fool UK.

And if you are looking for somewhere to invest your funds, I’m going to take a look at two of my favourite dividend investment trusts and outline why I think they deserve a place in your Stocks and Shares ISA. 

Global finance 

My first investment trust pick for income investors is Law Debenture Corp (LSE: LWDB). This company’s a bit of an anomaly in the investment trust world because it’s essentially a financial services business with an investment fund attached. 

The financial business provides essential management services to pension providers and asset managers. This side of the company is growing rapidly. Revenues increased 9% in 2018 and management is expecting this trend to continue into 2019, which should support further dividend growth. 

Indeed, this side of the business has helped the investment trust build a 40-year track record of dividend increases. During this period, the firm has delivered annualised dividend growth of 4.5%. On top of the investment business, there’s the group’s investment trust portfolio, which is currently comprised of leading blue-chip FTSE 100 dividend stocks. 

Management has followed a similar investment strategy for the past few decades and, over the past 10 years, growth of the portfolio combined with the growing investment services business has produced a total share price return for investors of 240.3%. That means £1,000 invested in Law Debenture 10 years ago would have been worth £3,4351 at the end of 2018. 

At the time of writing, the shares support a dividend yield of 3.1% and trade at a discount to the net asset value of around 7%. The annual management charge is approximately 0.45%. 

International income 

Law Debenture’s portfolio is very UK-focused. Considering all of the uncertainty facing the UK right now, I think it’s also sensible to have some exposure to international stocks, and Murray International Trust (LSE: MYI) meets this aim perfectly, in my view. 

Murry International’s portfolio is invested around the world, predominantly in North America and Asia Pacific. Only 10% of the portfolio is invested in UK equities, and the rest is spread globally, invested in cash-rich, high dividend stocks such as Mexican airport operator Grupo Aeroportuario del Pacífico. 

Other global income investments included Taiwan Semiconductor, Unilever Indonesia and Chilean Chemical company Sociedad Química y Minera. 

This global income portfolio provides a steady income for the trust, which it then returns to shareholders. The current dividend yield is 4.4%. 

The one downside of this international portfolio is that it’s slightly more expensive to maintain than a domestic-focused investment trust. Murray International’s annual expense ratio is 0.7%, and the shares currently trade at a premium to net asset value of 3.5%. 

Still, I think it’s worth paying the extra money to get exposure to a broad basket of international income investments, managed by a highly experienced team. The firm’s senior investment manager is Bruce Stout who’s been investing internationally since 1987. That’s why I’m buying Murray alongside Law Debenture for my ISA today.

The post 2 dividend investment trusts I’m buying for my ISA appeared first on The Motley Fool UK.

Law Debenture Corp (LSE: LWDB) is one of my favourite investment trusts for this reason.

Strong track record

Law Debenture is not your average investment trust. This company is a financial services business with an investment trust attached, which was initially established to invest clients’ money. Its professional services arm and investment portfolio is a potent combination that has enabled Law Debenture to generate outstanding returns for investors over the past decade. 

Indeed, over the past 10 years, the firm’s total net asset value return is 169% compared to the FTSE Actuaries All-Share Index total return of 111%. The fund’s total share price return is 203% since June 2008.

And I expect this trend to continue. Law Debenture’s financial services business offers services such as corporate and pension trust management as well as governance solutions, all highly specialist sections of the market where reputation counts for everything and areas where companies are more than happy to outsource to lower costs. Profit after tax at this division increased 10.7% year-over-year for the half year ended 30 June 2018.

Alongside the professional services business, there’s Law Debenture’s investment trust. The portfolio is managed by James Henderson of Janus Henderson Investors. The main holdings are FTSE 100 dividend stalwarts such as Royal Dutch Shell and BP. Some 64% of the portfolio is invested in the UK, with the remainder spread across Europe North America and Asia. So, if you’re worried about the impact Brexit might have on your portfolio, this globally diversified investment trust offers plenty of diversification. Further, the annual management fee is less than 0.5%. 

The latest net asset value (NAV) is 697p per share so you can currently acquire this investment trust at a 12% discount to NAV. The current dividend yield is 2.8%.

Defensive income 

If Law Debenture does not interest you, Target Healthcare (LSE: THRL) might be a better buy. This company owns and operates specialist, purpose-built UK care homes on long leases. 

According to the group’s results for the year ended 30 June 2018, published today, the weighted average unexpired lease term of its current portfolio is 28.5 years. With income guaranteed for nearly three decades on the company’s care home portfolio, I’m confident that Target Healthcare will benefit any retirement portfolio. 

Today the group reported a 3.7% increase in NAV per share to 105.7, along with a 2.7% increase in its annual dividend to 6.5p. Based on these numbers, the trust is currently trading at a slight premium (6%) to underlying NAV and supports a dividend yield of 5.8%.

Target Healthcare might not be shooting the lights out regarding growth, but if you are looking for a long-term income champion, then it seems to me as if this healthcare real estate investment trust has all the hallmarks of an income play you can buy for your retirement portfolio and forget.

The post 2 top income investment trusts that could help you retire early appeared first on The Motley Fool UK.

It has the single goal of achieving long-term capital growth at a rate higher than the total rate of return from the FTSE Actuaries All Share Index by investing in a geographically diversified portfolio. Not only has it met this goal, but it has nearly doubled its benchmark return over the past 10 years. 

According to the full-year 2017 annual report, over the past decade, Law Debenture has produced a total return for investors of 154%, compared to the FTSE Actuaries All-Share Index total return of 85% over the same period. The performance has also exceeded that of its global peer group, which produced a total return of 137% over the past decade. 

Multiple income streams

It derives its income not only from investments, but also professional services provided by the wider group, giving it an edge over the rest of its investment trust peers. It also means the company is globally diversified across business lines, so it should be able to continue to produce positive returns even if markets tank. 

However, despite this advantage, and the trust’s positive performance over the past decade, the shares currently trade at an 11% discount to the reported net asset value of 670p per share. As well as this discounted valuation, the shares support a dividend yield of 2.9%, which is less than the wider market, but considering the firm’s record of capital growth, I’m happy to overlook the lack of income. 

To add to the trust’s appeal, it only charges 0.43% per annum and there’s no performance fee levied on top. 

Private investing 

Law Debenture’s performance history, diversified income stream and low charges show clearly that the trust is working to achieve the best returns for investors, and the same can be said for Caledonia Investments (LSE: CLDN)

Caledonia is another business that invests outside of the public markets to achieve the best returns for investors. The group owns stakes in bingo operator Gala Bingo, pub company Liberation and recently raised £80.2m from the sale of the Sloane Club, a private members club in London. 

Its returns are not as high as those of Law Debenture, which can be blamed, to a certain extent, on its business model. Indeed, it usually takes longer to realise value from private investments rather than those in the public equity markets as there’s no daily price for the assets. It can take several years for asset sales to be crystallised. Nonetheless, the trust has still produced an annualised 13% over the past five years, beating the FTSE All-Share by 3% per annum over the same period. 

And investors can currently snap up shares in this private equity business on the cheap. The last reported net asset value was 3,311p, around 20% above the current market price. As well as this discount, the stock also supports a dividend yield of 2%.

The post Is this an unmissable opportunity to snap up these 2 global investment trusts? appeared first on The Motley Fool UK.

I ran a search for UK companies, a) with a market cap greater than £100m, b) whose adjusted operating cash flow has grown between 70% and 100% in the last year, and c) whose revenue growth was above 20% in the last year.

At least a couple of names may deserve attention now and in months to come.

Central Asia Metals

Stocks of large metal and mining companies have been out of favour for some time, but what about Central Asia Metals (LSE: CAML)?

With a market cap of £173m, this is the smallest entity I have identified. A diversified metals and mining company, CAML is listed on the AIM and is based in London. Its stock has risen 16% this year and 35% in the last 12 months. In the last three years, it has outperformed the FTSE 100 by 74 percentage points, excluding dividends.

CAML’s operating profit turned positive for the first time in 2012, and doubled in 2013. Return on assets and return on equity have risen steadily, while its the balance sheet is debt-free. CAML’s operating margin is impressive, and estimates for revenue growth are decent. Still, proper due diligence should be performed on its asset base and its management team. Its free float is only 62.6% of the total shares outstanding. Dilution risk is real because such businesses tend to have very limited funding options at this stage of maturity.

Vertu Motors

With a market cap of £202m, Vertu (LSE: VTU) ranks just above CAML in terms of size. A retailer in the automotive industry, Vertu is listed on the AIM and is based in Gateshead. Its stock has risen 6% this year and 46% in the last 12 months. In the last three years, it has outperformed the FTSE 100 by 53 percentage points, excluding dividends.

As one would expect, its operating profitability is extremely low — it ranged between 0.7% and 1.1% over the last five years – but Vertu has constantly grown revenue over time and is expected to hit £2bn by 2016. Its £1.6bn trailing sales double the turnover it reported in 2010. It boasts a net cash position of about £30m, which signals a relatively strong balance sheet.

In 2013, inventories rose above historic trends and impacted operating cash flow to the tune of £70m, but Vertu’s track record provides a clear indication that inventories are properly converted into sales – and that also shows in the cash flow conversion cycle of the company. Moreover, operating cash flow stood at its highest level on record last year, in spite of a significant rise in inventory, which may back future growth.

OPG Power Ventures / The Law Debenture Corporation

OPG (LSE: OPG) owns and runs power projects in India. It has a market cap of £381m and is listed on the AIM. Corporate governance could be an issue, while high leverage doesn’t bode well with value creation. Its stock has risen 87% this year and 64% in the last 12 months. In the last three years, it has outperformed the FTSE 100 by 13 percentage points, excluding dividends. It’s a high-risk/uncertain-return investment.

Let’s move on to our last candidate, The Law Debenture Corporation (LSE: LWDB), a London-based investment trust and fiduciary services business with a market cap of £621m. I wouldn’t touch it because the value of its assets base can be extremely volatile and there are more valuable options around.

The post Hunting For Stellar Growth: Central Asia Metals plc, Vertu Motors plc, OPG Power Ventures plc and The Law Debenture Corporation plc. appeared first on The Motley Fool UK.