Here are two ideas I like right now.

A safe pair of hands?

First up is the Murray Income Trust (LSE:MUT). The stock has a current dividend yield of 4.41%, which hasn’t fallen below 4% for the past five years. It has 26 years’ worth of consecutive dividend growth, making it one of the most reliable in the FTSE 250.

For those unfamiliar, the business is an investment trust that aims to provide a high and growing income alongside capital growth. It does this by investing mainly in large, established UK-listed companies across almost all sectors. The trust makes money by collecting dividends from the companies it owns, and hopefully through capital appreciation if those shares rise in value.

As a result, the dividend is sustainable because it’s based on a variety of businesses paying, which the trust simply collects. Therefore, it’s lower risk than if the income were solely dependent on one firm.

Another reason to like the stock for income is due to the structure of investment trusts. Regulation allows them to retain some income in reserve during good years and use it to support dividends when markets are tougher. For income investors, that smoothing effect can be incredibly valuable and is a key reason why payouts tend to be more consistent than many individual shares.

In terms of risk, the five top holdings account for 25.1% of the overall portfolio. That’s quite concentrated, so if any of these underperform, it could be a significant drag on performance.

Stable tenants

Another stock is Primary Health Properties (LSE:PHP). It can boast 25 years’ worth of consecutive dividend growth, with a dividend yield of 7.79%. Over the past year, the share price has fallen by a modest 2%.

The recent share price weakness largely stems from macro forces rather than company-specific problems. As a real estate investment trust (REIT), the firm is highly sensitive to interest rates. Concerns about higher UK rates driven by energy inflation have weighed on the stock, which remains a risk going forward.

However, I still believe it’s a great income stock to consider. Its dividends are underpinned by government-backed rental income, with most tenants NHS-related. In my eyes, this makes cash flows about as defensive as they come.

Looking ahead, the outlook appears encouraging. Demand for modern primary healthcare facilities is rising, driven by an ageing population and a structural shift away from hospitals towards community-based care. That should keep the dividend strong.

Overall, I think both stocks have strong income potential going forward, which supports their strong track records and could be considered by investors.

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But first, we only have a couple of weeks to panic over what to do with our current ISA year while we still can. Well, there’s no need for panic… but I can see good reasons why people might get a bit apprehensive.

With so little time left, how are we supposed to decide which stocks and shares to buy before 5 April? It’s a concern I often hear, but it’s really not a problem. We don’t actually need to buy any stocks before the deadline. We just need to get our money in.

So just transfer as much cash as we can to our Stocks and Shares ISA account before the time runs out. And then we can take all the time we need to plan our actual investments.

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.

What to buy?

New Stocks and Shares ISA investors often go for an index tracker fund, like the iShares Core FTSE 100 UCITS ETF. That attempts to match the FTSE 100‘s overall performance. And I think it can be a great first move.

But a key part of starting out with an ISA, in my view, is to use it to help us develop an individual strategy. Over time, we can decide which kinds of individual shares we like — maybe dividend shares, or growth shares, small-cap, or whatever. And we can temper our picks to suit our approach to risk too.

I reckon investment trusts are great for this. They spread the cash over a number of stocks based on a stated strategy. And I rate Murray Income Trust (LSE: MUT) as an excellent one for new ISA investors to consider.

Dividend Hero

The dividend yield, currently at around 4.5%, is very nice to have. And Murray Income is one of the Association of Investment Companies’ Dividend Heroes. Those are investment trusts that have raised their annual dividend for at least 20 years in a row. Murray has so far managed it for 52 consecutive years.

That does present a risk, though. Should the dividend hike not happen one year, I could see the share price suffering. And the past five years haven’t brought the best growth.

Strategy

Despite the name, the trust has a wider strategy. It aims for dividend income combined with capital growth, mainly from shares in UK companies. To that end, its top 10 stocks include AstraZeneca and HSBC Holdings — the two biggest on the FTSE 100. National Grid is there too, and that’s long been a UK dividend favourite.

Watching the trust’s individual holdings, we can get a feel for which kinds of stocks we might like to venture into next. Eyes on the top 10 holdings by weight? Keep track of the biggest dividend yields? Watch the smallest market cap stocks? We can learn as we profit.

The post Time’s running out for our 2025/26 Stocks and Shares ISA plans! 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.

The post 3 dirt cheap FTSE 250 investment trusts to consider this week! appeared first on The Motley Fool UK.

Murray’s mint

Dividends are never, ever guaranteed. As we saw during the Covid-19 era, even the most financially stable Dividend Aristocrat can slash, postpone or cancel shareholder payments at short notice.

Fossil fuel giant Shell, for instance, cut dividends for the first time since 1945 during the pandemic.

Investing in an income-focused trust doesn’t eliminate this threat. But their diversified holdings mean the danger of dividend disruption can be greatly reduced. Murray Income Trust (LSE:MUT), for instance, has managed to grow annual dividends for 51 straight years.

In total, the trust has holdings in dozens of companies in the UK and overseas. Major holdings here include AstraZeneca, Diageo and National Grid. And today, its forward dividend yield is a healthy 4.7%.

Be aware however, that only a maximum of 20% of Murray Income Trust can be allocated to international shares. This could leave its share price vulnerable if broader appetite for UK stocks weakens.

Euro star

Real estate investment trusts (REITs) like Segro (LSE:SGRO) can also be great sources of passive income. This is thanks to sector rules requiring at least 90% of a firm’s rental profits to be distributed to shareholders. It’s the price they pay for breaks on corporation tax.

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.

Property shares like this can be reliable dividend stocks for other reasons. They often lock their tenants into ultra-long-contracts which, in turn, provides a reliable stream of income. Segro’s weighted average lease term (to earliest break) was a reassuring 7.3 years as of June 2024.

With a geographic footprint spanning the length and breadth of Europe, Segro’s able to withstand localised shocks and continue paying a reliable dividend.

The FTSE 100 company’s lifted annual dividends every year since 2013. And today it carries an index-beating forward dividend yield of 4.5%.

Its share price may fall further if interest rate cuts fail to match market expectations. But over the long haul, I expect Segro to deliver strong overall returns.

Green giant

Greencoat UK Wind‘s (LSE:UKW) another beaten-down property stock that’s worth a close look. Recent share price falls have supercharged its forward dividend yield to a stunning 8.4%.

As well as interest rate risks, this renewable energy stock faces a more long-term problem that it can’t control. When the wind doesn’t blow or the sun hides, energy generation (and by extension profits) can slump.

However, Greencoat — whose portfolio of wind farms spans England, Scotland, Wales and Northern Ireland — does smooth out this risk with its wide geographic footprint.

Unlike in the US, the political landscape in Britain remains extremely favourable for energy providers like this. One of the government’s first actions was to lift the ban on new onshore wind farms last July, giving a boost to the likes of Greencoat UK.

Given the stable nature of energy demand, the FTSE 250 business can also be expected to pay a healthy dividend at all points of the economic cycle. That can’t be said for most stocks.

The post 3 dividend shares with FTSE 100-beating yields to consider today! appeared first on The Motley Fool UK.

If it’s tax-free, even better. There’s no tax to pay on interest from a Cash ISA, for example. But as Bank of England rates fall, I expect we’ll soon be back down to interest of 1% or less. I’d rather pay tax on a better return than save the tax on such a pittance.

Fortunately, there’s a way we can aim for the best of both worlds, using a Stocks and Shares ISA.

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.

Top returns

For more than a century, the UK stock market has beaten other forms of investment hands down. Over the past 20 years, total annual FTSE 100 returns have averaged 6.9%. That includes share price gains and dividends.

It’s been volatile though. In the 2019-2020 financial year, the average Stocks and Shares ISA made a 13.3% loss. And I thought it was going to be a lot worse, seeing how the early days of the pandemic were going.

Investing in shares really needs a long-term outlook. For investors who aren’t comfortable taking short-term losses, well, maybe they should stash their cash elsewhere. There’s nothing wrong with being cautious. Those of us who do go for shares can help reduce our risk by seeking diversification.

How much would we need in an ISA to make a 6.9% annual return worth £1,000 a month? I reckon it should take a pot of about £174,000. And if we wanted to take the cash only from dividends (of, say, 4% a year on average), we could need £300,000.

Dividends

I see four key parts to a strategy to achieve our passive income goals. Start early, invest as much as we can each year, keep going as long as we can, and reinvest all our dividends.

But what makes a good dividend? A high yield’s nice, but only if it can be sustained. I’d prefer a lower current yield, but based on a long track record of rises. Look at Murray Income Trust (LSE: MUT), for example.

It’s an investment trust that aims for a mix of rising dividend income and capital growth. It does it by investing in stocks such as RELX, AstraZeneca, National Grid, and a range of others. So there’s some diversification from just one buy.

Currently, the trust has a forecast dividend yield of 4.6%, I’d need around £261,000 to earn £1,000 a month passive income at that rate. More importantly, it’s raised its dividend for 51 years in a row.

Cover the risk

The 10-year share price performance hasn’t been brilliant, sadly. It does put the shares on a 12% discount to underlying assets, which might make them look good value — but it will reflect investor uncertainty.

Maybe the market’s put off by the trust being managed by abrdn, whose own share price performance has been poor?

There’s clearly risk here. But I do think investors with a long-term outlook who want to build passive income could do well to consider holding some investment trusts like this in their ISAs.

The post Here’s what I’d need in an ISA to earn £1,000 of passive income a month appeared first on The Motley Fool UK.

However, rates have been declining since the BoE’s cut on 1 August to 5%. I’ve already received several emails from my savings providers advising me that my returns will decrease. I anticipate more notifications too, as the central bank’s likely to lower interest rates further.

Placing money in a savings account can be a great way to manage risk. The specific amount to keep in cash versus investing in riskier assets like shares should be tailored to individual situations, investment goals, and risk tolerance.

But with rates dropping, it could be a good idea to re-evaluate how much you hold in savings. Here’s what I’d do if I had £10,000 sitting in my account and could make additional monthly investments.

Choose an ISA

The first thing I’d do is open a tax-optimised product, like a Stocks and Shares ISA. Despite its name, I can invest in a wide assortment of assets like equities, funds, trusts and bonds. And I don’t have to pay a single penny to the taxman on any capital gains I make or dividends I receive.

I’d concentrate on filling my ISA with US and UK shares because of the exceptional returns I could make (more on this later).

While I’m at it, I’d also look at opening a Cash ISA. With other savings accounts, I’d pay tax on any interest above my personal allowance (this is set at £1,000 and £500 for basic- and higher-rate taxpayers respectively).

A Cash ISA, like its share investing equivalent, could therefore save me a fortune in tax over the long term.

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.

Diversify my holdings

With my ISA set up, I’d aim to pack it out with a diversified portfolio of shares. This gives me an opportunity to capitalise on an array of investment opportunities while helping me to spread risk.

The ideal number of stocks would be 15 to 20, although I could choose fewer if I also invest in exchange-traded funds (ETFs) which contain a basket of different shares. Alternatively, I could buy an investment trust. These are listed companies that also invest in other businesses.

Murray Income Trust (LSE:MUT) is one that could help me hit my investment goals. It has money invested in 52 companies such as AstraZeneca, Unilever, National Grid and Anglo American. This gives me excellent diversification by sector and geography.

What’s more, most of its holdings are in FTSE 100 and FTSE 250 companies, which means I could make a near-double-digit return each year. These indices have produced an average annual return of 9.3% since the early 1990s.

Past performance is no guarantee of future returns. But if this performance were to continue, a £10,000 lump sum investment in Murray — combined with a regular £200 monthly top up — could turn into around £745,850 over 30 years. This could then give me an annual passive income of £29,834 if I drew down 4% each year.

High exposure to cyclical shares mean the trust’s returns could disappoint during economic downturns. But as a long-term investor, I still think it could be a top buy right now.

The post £10,000 in the bank? That could turn into a yearly passive income of £29,834! appeared first on The Motley Fool UK.

The concept of making passive income from the stock market is very appealing. Yet when I started to get involved in buying dividend stocks, I wish someone had told me about a little trick that could have made my future income stream considerably higher. So even with £99 a week, here’s how I could build up a generous future amount.

The sweet taste of compounding

I don’t think I was alone in thinking that when I got paid a dividend, I could spend it straight away. I’d made my passive income and was free to enjoy it. However, if I had taken the dividend and bought more shares in the same company, I would have benefitted from compounding.

This ‘secret sauce’ sometimes isn’t known to new investors. Or sometimes people do know about it but choose to ignore it as they want the money right now. Compounding refers to the process of money increasing at a faster pace over time.

For example, let’s say I bought £500 worth of a stock that paid me £50 in dividend income a year. Instead of spending it straight away, I could buy £50 worth of the same stock. Next year, with a holding of £550, I could earn £55. If I repeat this for several years, my income further down the line is much higher than just enjoying the same £50 each year.

A dividend stalwart

A stock that would have served this purpose well is the Murray Income Trust (LSE:MUT). It has a current dividend yield of 4.65%, with 24 years of consecutive dividend growth. That’s an incredible statistic to think about.

If I had bought it a couple of decades ago and reinvested the dividends, my investment pot would be looking very healthy. I don’t own it but am seriously thinking about it for future income.

The trust (run by abrdn), focuses on buying equities that have an above-average dividend yield but that also have the potential for capital appreciation. The latter part is evident, as the trust has risen by 8% over the past year.

Current holdings include popular names such as Anglo American and Coca-Cola HBC, but also some more unusual companies such as Air Liquide.

Given that I don’t see a stock market crash any time soon, I think the stocks owned by the trust should continue to grow in value (and income potential) looking forward. However, a risk is that over 80% of the trust is focused on UK shares. I’d prefer for this to be more diversified, such as with more US or Asia exposure.

Adding up the pennies

If I invested £99 a week (or bundled it into a monthly sum), my target dividend yield would be 5%. If I kept this up for a decade, my pot could be worth £62.1k. Of this, £14.2k would have come from dividends that would have compounded in value!

Of course, when forecasting that far in advance, I need to take my projections with a pinch of salt. But it does go to show how by being disciplined now can help me further down the line.

The post I could make £14.2k of passive income from £99 a week with this secret sauce appeared first on The Motley Fool UK.

These are tough times, and I can see the sense in a Cash ISA now. If you just want to preserve capital with no risk, they seem ideal.

But the Bank of England (BoE) will cut rates, sooner or later. And May inflation was down to just 2%. So maybe soon.

A cash shift

By the time we’ve had a couple of cuts, I can see a lot of cash moving back into stocks. And to reduce risk, I reckon investment trusts could be a great move.

I go for trusts that offer wide diversification, and aim to grow their long-term dividend income.

City of London Investment Trust (LSE: CTY) has been my favourite for some time. We’re looking at a 4.9% dividend yield, which is in line with those Cash ISAs.

The share price has picked up a bit in 2024, so some of that cash shift might have already started.

Dividend Hero

The Association of Investment Companies has a list of what it calls its Dividend Heroes. That’s the ones who have raised their dividends for at least 20 straight years. City of London is one.

It does, I think, mean that if it fails to lift the cash one year, investors could dump the shares and we could see a price slump. But it’s managed it for 57 years, so far.

The trust holds a number of FTSE 100 shares, with BAE Systems, Shell and HSBC Holdings its top three.

UK diversification

Murray Income Trust (LSE: MUT) has also seen its shares pick up in 2024.

This trust has the same kind of aim, also going for a range of UK stocks. This time, AstraZeneca, Unilever and RELX are the top three.

And, right now, the dividend yield is a bit lower than City of London’s, at 4.4%.

Double up?

With the two so similar, why might I want to buy both? Well, it would give me even more diversification. And it would split the management of my cash two ways, and reduce my risk too.

Murray Income’s run by abrdn, while City of London is under the management of Janus Henderson Investors.

This time we have a record of 50 years of dividend rises in a row. Again, a fail one year to keep it up could hit the share price.

Better than a Cash ISA?

The returns from these two trusts are similar to a Cash ISA. But they’re not guaranteed the way its rates are, so they’re not as safe.

A Cash ISA does have the lower risk here, for sure. But when BoE rates (and ISA rates with them) come down, the higher risk of stocks might be worth it.

For those looking for lower-risk stock market investments, I’d say investment trusts like these are well worth considering.

The post I’d buy these investment trusts when interest rates fall appeared first on The Motley Fool UK.

However, there are still some opportunities to get decent dividends when the market is rallying. I think the best way is with investment trusts, as these tend to remain more stable in a volatile market.

Reliable > big

It’s easy to find a host of dividend stocks with big yields. A quick search will bring up companies like Vodafone, Imperial Brands, and BT Group. But top yields don’t necessarily equate to the best dividends. Vodafone recently slashed its dividend in half following months of falling prices. And tobacco companies often pump up their dividends to attract investment because some people consider the industry risky.

I prefer to go with stocks that have a proven track record of increasing their dividend year after year. A good place to find those is on the Association of Investment Companies’ ‘Dividend Heroes’ list. The list includes several notable investment trusts, including one I plan to buy this month, Murray Income Trust (LSE: MUT).

Diversified and reliable

With only a 4.3% yield, Murray Income Trust may not initially look attractive to dividend hunters. But the trust has increased its dividend for 50 consecutive years, so it’s certainly earned the word ‘trust’ in my eyes. The current dividend per share is 37p and earnings per share is 76p, so payments are well covered with a ratio of 56%.

I also see it’s highly diversified, providing exposure to business analytics (RELX), pharmaceuticals (AstraZeneca), consumer goods (Diageo, Unilever), and energy (BP, TotalEnergies).

It also includes finance-related companies like Sage, London Stock Exchange Group, Experian, and Intermediate Capital Group. The full list looks impressive to me and contains many companies I already own shares in.

Fees and risks

Like most trusts, Murray Income Trust comes with some fees. It has a 0.5% annual charge and 0.16% transaction cost. Naturally, this will slightly reduce any returns from the investment. As such, experienced investors may feel higher returns are possible by investing in the stocks individually. It’s certainly possible but would require more hands-on portfolio management. I like the passive income aspect of reliable investment trusts.

But with only 4.7% growth over five years, the trust’s share price performance has been low compared to some others. For example, Alliance Trust is up 57% and JPMorgan American Investment Trust is up 112%. However, these don’t offer the same reliable dividend payments.

The stock is currently trading at 862p, a 9.32% discount to the net asset value (NAV) of 955p. The 12-month average is -8.5%. This indicates the stock is cheaper than the value of the shares it represents and may have good potential for future growth.

Overall, I think Murray Income Trust is a great example of a dividend-paying stock that I would choose for small yet reliable returns. 

The post The smartest way to put £500 in dividend stocks right now appeared first on The Motley Fool UK.

A blip in earnings

First up is Ashmore Group (LSE:ASHM). It’s an investment manager that specialises in emerging markets. The stock sits in the FTSE 250, with the share price down 20% over the past year. This underperformance versus the index flags the stock up as potentially being cheap.

Such a fall has helped to push up the dividend yield, which now stands at 8.05%. This makes it one of the highest yielding stocks in the entire index.

Part of the drop has come from the fact that revenue fell in H2 2023 to £94.5m, from £110.3m the prior half-year. The impact of this was driven by lower assets under management. At a basic level, the less assets Ashmore handles for clients, the less fees (and revenue) that can be generated.

I don’t see this blip as a huge issue. I believe that if there are attractive emerging market opportunities, people will want to reignite their involvement. The management team agree with me, with the outlook that “superior growth, effective monetary policies and a weaker US dollar – look set to underpin further increases in asset prices in 2024”.

Therefore, I don’t see the dividend as being under threat in the near future.

Unloved UK stocks

Another option for investors to consider is the Murray Income Trust (LSE:MUT). The investment manager aims to allocate most of the funds into UK stocks, to produce both income and growth.

The dividend yield is 4.98%, so the dividend box gets a tick. As for growth, the share price is down 5% over the past year.

I see the trust as cheap for a couple of main reasons. Given that most of the exposure is to the UK, I feel its market in general is cheap right now. I get that sentiment towards the UK is weak. But when I look over at the US, the stock market is hitting all-time highs. There’s a big disconnect here and feel it’s only a matter of time before global investors cycle out of expensive US shares and channel the money towards the UK.

The trust also looks cheap when I compare the share price to the net asset value (NAV) of the stocks it holds. As of the March valuation, the NAV is 10% higher than the share price. Over time, I’d expect this to reduce closer to zero.

As a risk, the UK stock portfolio wouldn’t help me to diversify my overall investment pot at all. In fact, it would leave me more exposed to a poor year here in the UK, which might not be that wise.

For investors looking to snap up some cheap income shares, I think both are worthy for consideration.

The post These UK stocks are cheap as chips for passive income appeared first on The Motley Fool UK.