I don’t mind a lower yield if it promises consistent growth for the indefinite future. And of course, I also make sure the stock price isn’t going down the toilet.

With that in mind, these two FTSE 250 investment trusts have caught my attention lately. So I calculated the potential returns they could net me in 10 years.

City of London Investment Trust

Managed by Henderson Funds, the City of London Investment Trust (LSE: CTY) invests primarily in UK-based public equity markets. The 164-year-old trust focuses on dividend-paying growth stocks across a diversified range of sectors.

I believe it’s a safe and stable option for consistent growth and payments. But its price performance leaves much to be desired. It’s up only 130% in the past 20 years, providing rather weak annualised returns of 4.3%.

But its dividend growth’s been strong, tripling from 7.18p in 2000 to almost 21p today.

That equates to a 15-year compound annual growth rate (CAGR) of 3.5%. With those numbers, if I bought 3,000 shares for £12,630, I could almost triple my investment to £33,315 in just 10 years. Assuming that the current dividend and price growth rates held and I reinvested the dividends.

I do have one concern though — the trust’s share price may be somewhat overvalued. It’s increased recently to 16.4 times earnings and is calculated to be overvalued by 123%, based on future cash flow estimates.

While the price-to-earnings (P/E) ratio is on-par with the industry, it could stifle future growth if earnings don’t improve. However, while it could affect the overall return, this is unlikely to affect dividend payments.

Murray International Trust

Murray International Trust (LSE: MYI) is a closed-end mutual fund that invests in a diversified mix of public equity markets globally. It’s been around for over 100 years and is managed by Aberdeen Fund Managers.

It currently sports a decent 4.6% yield. Over the past 20 years the yield has fluctuated between 3% and 7% but has been steadily increasing overall. This could make it a reliable choice for a slow but steady stream of passive income. 

In the past 20 years the price is up a modest 239%, equating to annualised returns of 6.3%. Admittedly, recent performance has been disappointing. It’s down 7% over the past year, significantly below the GB Capital Markets growth of 9.4%.

But what I really like is its dividend growth track record. Since 2004, it’s steadily increased from 3.26p per share to 11.5p today.

That equates to a 15-year compound annual growth rate (CAGR) of 6.06%. If that rate remained consistent and I bought 4,000 shares today for £9,960, I could more than triple my investment to £33,792 in just 10 years. Assuming I also reinvested the dividend payments to compound the returns.

To be honest, these types of investments are not super-exciting. But with steady growth and a solid balance sheet, they’re the type that investors could simply ‘set and forget’. I think that makes them a winning combo for a dividend portfolio.

The post 20+ years of consecutive dividend growth? I like the look of these reliable dividend stocks appeared first on The Motley Fool UK.

Both make the Association of Investment Companies’ list of Dividend Heroes. They’ve raised their dividends for 55 and 54 years in a row, recently yielding around 5% and 4%, respectively. Here are three more I’m considering.

Contrarian investment trust

I quite like the look of Fidelity Special Values (LSE: FSV) at the moment, with a 3.2% dividend in 2020. That’s not one of the biggest yields around. But it is nicely progressive, having grown by around 25% over the past three years. And with a long-term outlook, I see better value in a relatively modest dividend with a progressive future then I do in a higher yield but with less convincing prospects.

About three-quarters of the trust’s assets are in the UK. The current biggest holding is Legal & General, with Aviva taking the third spot. Royal Dutch Shell is sandwiched in between. The trust is managed with a contrarian approach, and that shows from its big investments in these two depressed sectors – sectors I definitely consider risky now.

Still, a contrarian outlook fits in with my risk profile, and there’s reasonable diversification in the trust’s assets. I’m putting Fidelity Special Values on my list of buy candidates.

Big yield

I can’t overlook Merchants Trust (LSE: MRCH), which produced a dividend yield of 6.2% in 2020. That was a year when earnings were hit by Covid-19 too. And it shows the benefit of investment trusts being able to hold back some cash in better years to keep the dividends going during leaner times.

This trust has lifted its dividend for 39 straight years, so there should be plenty of motivation to keep it going. Merchants has GlaxoSmithKline as its top holding, and I’m upbeat about that. British American Tobacco and Imperial Brands are in the portfolio too. And while they both offer high dividend yields, that might introduce an ethical barrier for some investors.

What’s the downside? Well, we really need to see earnings growth getting back on track. If it doesn’t, and dividend progress falters, we might see investors heading for the door. I think that risk is minimal, though. And I’m bullish.

Global income

I’ll head away from UK-focused trusts now and go for Murray International Trust (LSE: MYI). This one still has around 10% of its cash invested in the UK, but the rest is spread quite widely around the globe. It aims to achieve better than average dividend yields, and to maintain progressive rises ahead of inflation. The trust has been achieving that, providing a yield of 4.8% in 2020.

The international diversification is intriguing. Murray International has Taiwan Semiconductor Manufacturing, which has a NASDAQ listing, as its biggest holding. Unilever is its biggest UK-based holding, and that’s a company I’ve liked for many years (but have never invested in directly).

The risk for me here is international uncertainty. By that I don’t mean just risky economies and volatile exchange rates. I also mean my own lack of understanding of a lot of the companies involved. But I can’t help feeling it might complement my UK-focused investment trust holdings.

The post Some of the best UK investment trusts to buy for income appeared first on The Motley Fool UK.

A high dividend share

First is real estate investment trust (REIT) Primary Health Properties (LSE: PHP). It’s well established and specialises in the rental of primary healthcare facilities within the UK and Ireland.

The group’s portfolio comprises 513 primary healthcare facilities, valued at £2.6bn. Many of the assets are GP surgeries.

Primary healthcare going more digital (a trend accelerated by the pandemic) could be considered a threat and could hold back the share price. Overall, though I think Primary’s assets should rise in value and provide good recurring revenue. An ageing population mean there should still be a big need for physical consultations with a GP in future. 

The REIT structure and the dividend

A pro and a con of the REIT structure is that it must pay out 90% tax-exempt income profits to shareholders. This is good for getting income when markets are steady. The flip side is, it provides fewer reserves and room to manoeuvre when markets become trickier.

Yet with a dividend yield of 4% and clients who have steady state-funded income, I think this is a solid dividend share. That’s why I’ll be happy to add it to my own portfolio when I’m looking for another income stock.

Another share yielding over 4% 

The second dividend share I like is investment trust Murray International (LSE: MYI). The trust invests internationally with top holdings including Taiwan Semiconductor, Grupo Aeroportuario, GlobalWafers, CME and Roche.

It’s one I already hold and happily, it has seen good share price growth in recent times, even though it’s high-yielding. This is probably partly to do with the post-Covid recovery and the preference for value shares at the moment.

The shares come with a dividend yield of 4.5%. Given that the strong recent share price performance will have pushed down the yield, it’s still a strong high-dividend share, in my opinion.

The downsides of this dividend share

The downsides with this trust are that it’s hard for a UK investor to know much about any of the holdings. From the top five holdings I’ve only heard of Roche, for example. As an investor I need to put faith in management to select the right companies.  

Another downside of buying the shares now is that they are at a slight premium to the net asset value. Usually this would put me off, but the shares have good momentum and could continue to benefit from the Covid recovery.

Ongoing charges of 0.68% are competitive for a trust that invests internationally and given the portfolio is very different from any tracker, is a price worth paying, in my opinion. What I mean is it would be hard as a UK investor to replicate what Murray International does, so I think it’s worth paying for the manager.

I like the trust as it provides my portfolio with geographic diversification, as well as holding a wide range of income-producing companies and bonds. For me it’s a very good high-dividend share.

The post 2 of the best UK high-dividend shares appeared first on The Motley Fool UK.

Back to 2020. The first three events could perhaps be repeated. But a cash ISA with 5% interest rate? No chance. Around 1.6% would be the best on offer.

So, what’s the alternative? Investing in the stock market. Several UK companies pay a dividend per share owned, and Edward Sheldon examined three leading dividend candidates earlier this month. A different option, however, is the investment trust.

Why investment trusts?

I like the way that investment trusts are structured with an independent board responsible for safeguarding investors’ best interests. Low ongoing charges are usually another key feature, and under current rules they can retain up to 15% of the income that they receive each year, and then use this to sustain dividends in lean years.

Companies that paid large dividends in 2019 have mostly either cut them completely, or vastly reduced them during the Covid-19 pandemic. Crucially, retained capital has allowed investment trusts such as City of London to not only maintain a dividend payment, but increase it for the 54^th year in a row.

Global investment

I love the maxim of Murray International Trust (LSE: MYI), which aims “to achieve an above average dividend yield, with long term growth in dividends and capital ahead of inflation”. This investment trust is currently trading at a small discount, the dividend yield is 5.73%, gained through investing principally in global equities such as Roche and Verizon. Income is paid quarterly, so gives a bedrock for a passive investor.

Managed by Bruce Stout since 2004, the trust has been in existence for over 100 years. Historical performance is strong, but has lagged its benchmark FTSE World over the last few years due to a lack of exposure to tech stocks and a higher than average exposure to the Asia Pacific region. The trust management believe that future dividend and growth opportunities will be found in this market.

UK dominance

For those seeking a stronger UK focus, then Merchants Trust (LSE: MRCH) is worth considering. The share price is substantially down from its high of £5.69, and as a result the yield is an impressive 7.3%. A high exposure to cyclical stock areas such as travel, leisure and aerospace has driven underperformance compared to the wider market. Recent additions to the portfolio have been centered on defensive tobacco stocks via British American Tobacco and Imperial Brands, and telecom stocks (BT and Vodafone). Manager Simon Gergal has committed to a “high and growing yield”, although it remains to be seen if this can be achieved in the current climate. The answer should become clearer as companies begin to reinstate dividends, and given the potential for share price growth as the market recovers post Covid-19, I’m optimistic that Merchants will provide an excellent long term investment.

Although investment trusts can provide yields of 5% plus, it is important to bear in mind that capital is always at risk. Risk can be mitigated through diverse holdings, something that either of these trusts can offer. In my opinion, they would be a good addition to a balanced portfolio.

The post 2 high-yielding investment trusts I’d buy now appeared first on The Motley Fool UK.

The good news is you still have time to build a healthy pot of money, by investing tax-free through your Stocks and Shares ISA allowance. And there’s plenty of opportunities out there right now.

As ever, there are risks, such as Middle East tensions and the global trade war, but world markets nonetheless rose more than 25% last year. Equities typically shrug off short-term problems like these, to post strong growth in the long run.

I think investment trusts are a good way to invest, as they tap into global growth and income opportunities. Here are two that could help you retire on a rising passive income.

Edinburgh Investment Trust

Edinburgh Investment Trust (LSE: EDIN) invests in the UK equity income sector, which means it aims to generate both capital growth and a rising dividend income, in this case from investing in the FTSE All-Share. Its long-term performance has been strong, delivering a total return of 156% over 10 years, according to the Association of Investment Companies.

There’s another attraction too. By investing in a spread of income-generating stocks, such as BP, Royal Dutch Shell, and Legal & General Group, Edinburgh generates a healthy yield of 4.55% a year. That’s far more than you’ll get on a Cash ISA, where even the best buy rates pay little more than 1%.

UK shares have underperformed global stock markets because of Brexit uncertainty, and I think they could now start catching up. This could make today a good time to buy this fund, ahead of the next surge in share values.

A big attraction of UK equity income investment trusts is they aim to increase their dividend payout every single year. Edinburgh has lifted its for the last 14 years. You can reinvest those dividends for growth and, when you retire, have a growing, passive income to live off.

Murray International

As well as investing in the UK, it could pay to spread your wings internationally. Murray International Trust (LSE: MYI) can help you do that, because it’s a global fund across Asia Pacific, North America, emerging markets and Europe, with less than a 10th of its portfolio invested in the UK.

Top holdings include renowned companies such as Taiwan Semiconductor, Swiss pharmaceutical firm Roche Holdings and US tobacco giant Philip Morris International, which means it could balance the UK-focused Edinburgh investment trust nicely in your portfolio. 

Murray has also delivered a strong performance, with a total return of 150% measured over 10 years and, better still, offers a generous income. It currently yields 4.21% and has a great long-term track record of increasing its dividend every year.

So if you’re 40 and don’t have any savings, these two trusts could help you play catch-up and build a passive income for a happier retirement.

The post No savings at 40? I’d buy these 2 investment trusts to retire on a rising passive income appeared first on The Motley Fool UK.

Going global

I think one of the best things about the investment trust Murray International Trust (LSE: MYI) is its global reach. The trust invests in companies ranging from Taiwan Semiconductor Manufacturing to Verizon and Roche. Although the US makes up the biggest proportion of investment, it only accounts for around about 15% to 20% of the total, with significant investment in countries as diverse as Brazil, Mexico, the UK, Singapore and India.

At a time when many investors are worried about Brexit, the global nature of the trust may well be appealing. It also gives the trust managers the flexibility to scour the globe looking for profitable, higher-yielding companies.

The dividend and a discount

Income is paid out to investors quarterly, ideal for a retirement fund where income is a primary objective for investing in shares. The yield is not too shabby either at around 4.4%.

The dividend has been steadily increasing for many years and with trusts having the flexibility to sustain their dividend payments during harder times, they’re often more resilient, I believe, in more difficult economic periods. With a recent survey finding that 70% of economists think a US recession will strike by the end of 2021, the reliability trusts provide may well be important for any retirement fund.

As a last point on the trust, it’s now trading at a bigger discount to its historical norm, meaning the net asset value (NAV) is 1,180p but the shares can be picked up for 3% under that. So there could be potential upside for investors if the discount gap narrows or the shares start to trade at a premium to the NAV. 

Making life sweeter

Supplying ingredients to the global food and beverage industry is sweet business for FTSE 250 company Tate & Lyle (LSE: TATE). The company has a dividend yield of around 4.2% which is towards the higher end of the spectrum for the FTSE 250 and the shares are trading on a P/E below 15, which indicates good value. The company’s P/E is currently 13.

The last set of full-year results, which was for the year ended 31 March 2018, showed profit before tax was up 23% and debt was reduced from £452m to £392m. At the time of the results, it pointed out a desire to grow organically as well as to acquire companies to grow, as well as to have a progressive dividend policy and return excess cash to shareholders. I think these aims bode well for the future, as a rising dividend should make the company more attractive to income-focused investors.

When looking at the long term – as we at Motley Fool believe shareholders should – Tate & Lyle seems well-placed to capitalise on the trends towards healthy eating, as my Foolish colleague Kirsteen Mackay has explained in more detail. There’s clearly a huge market opportunity and I think investors may be undervaluing the potential for the company to grow in the future. For that reason I think it’s a great share for a retirement fund.

The post I think this investment trust and this share could help fund a richer retirement 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.

Easy, easy

It is far easier to invest in stocks and shares, plus you can take all your returns free of tax through your annual ISA allowance.

Lots of ordinary savers were relying on buy-to-let to generate income in retirement, but you can do this with a balanced portfolio of dividend-paying stocks and shares, or collective funds such as investment trusts and unit trusts. These five generate income of more than 4% a year and would create a balanced retirement portfolio on their own.

The list has been assembled by Laura Suter at investment platform AJ Bell, but many are regular Fool favourites, notably City of London Investment Trust (LSE: CTY), launched in 1891 and now run by Janus Henderson fund manager Job Curtis, who has been at the helm for 27 years.

Fool writer Ed Sheldon picked out this defensive dividend-paying trust in January. He praised it for increasing its dividend for more than 50 consecutive years while adding that Curtis offers a degree of stability and a consistent investment style. 

High yield, low charges

The trust targets UK equities and its top 10 holdings contain plenty of familiar names – including Royal Dutch Shell, HSBC Holdings, BP, Diageo, Lloyds Banking Group, British American Tobacco and GlaxoSmithKline. It currently yields 4.5% and has an ongoing charges figure of just 0.41% a year, which means you keep more of the income yourself.

The UK market offers some of the most generous dividends in the world, with the FTSE 100 currently yielding around 4.5% income a year. This makes it a rewarding hunting ground for income-paying funds, such as Murray Income Trust (LSE: MYI), another on the list. Again, you will notice some familiar names, including Prudential, AstraZeneca, Rio Tinto and Unilever. The yield is 4.4% and the ongoing charges figure is 6.9% a year.

Steady income

Ed Sheldon recently praised this one too, noting at the time that it was trading at a large discount of 9.6% to its Net Asset Value, although this has since narrowed to 6% as stock markets and investor sentiment have recovered. The market recovery has also boosted performance, with Murray Income Trust rising 10% so far this year.

Investment trusts are particularly attractive for income seekers because they are able to hold over some of their profits to supplement income in leaner years, but it is still worth highlighting three unit trusts that Suter has selected.

Evenlode Income is mostly invested in the UK but has 10% US exposure, while JP Morgan Emerging Markets Income offers greater global diversification, while Artemis Strategic Bond balances your stock market holdings with income from a global spread of government and corporate bonds. And they’re all far easier to buy and manage than a buy-to-let property.

The post Why would I bother with buy-to-let when these 2 investment trusts yield 4.5% a year? appeared first on The Motley Fool UK.

First step

I reckon the first step to successful investing is figuring out your objectives and risk tolerance. You need to define your goals and objectives before you are able to make good decisions on which investments to choose. What you’re investing for, the risks you’re willing to take and your investment horizon can all affect how much you’ll need and which options you should pick.

If you’re just starting out, you’ll probably want to consider investment trusts first. Shares in such trusts are traded just like other shares. But as a fund, investment trusts offer the advantages of being run by a professional fund manager and diversification from buying into a well-balanced portfolio of investments.

Growth and income

If you’re looking for a combination of growth and income, then the Lowland Investment Company (LSE: LWI) might be a great first pick.

This fund invests in a broad spread of predominantly UK companies, with the aim of giving shareholders a higher than average return with growth of both capital and income over the medium-to-long term.

With 121 holdings as at 31 December, the fund invests in a diversified portfolio of companies of differing sizes. Normally, not more than half of its portfolio by value is made up of the largest 100 UK companies, with the balance invested in small- and medium-sized firms.

Outperformance

The fund has a strong track record of outperforming the benchmark FTSE All-Share Index. For the five years to the end of December, the net asset value (NAV) of the trust increased by 79%, easily beating the performance of the FTSE All-Share index, which generated a return of 63% over the same period.

At the time of writing, shares in the trust offer investors an attractive dividend yield of 3.5% and it trades at a slight discount to its net asset value of 6%.

Global diversification

Investors seeking geographical diversification may instead consider the Murray International Trust (LSE: MYI)

Launched in 1907, this fund has invested in a well-balanced portfolio of UK and international shares, with the aim of delivering both growth and income to shareholders. Its investment approach is to seek undervalued, but quality, companies that have a solid business focus, sound management, a strong balance sheet and a good corporate governance record.

Fixed income investments

Equities dominate its portfolio, with an 83% weighting, but the trust also owns a number of fixed income investments, which account for a further 16% of its portfolio. This gives the Murray International Trust even more diversification than some simple equity funds, since the price of bonds generally do not move in tandem with the stock market.

The fund’s top five equity holdings are: Taiwan Semiconductor Manufacturing (4.8%), Quimica Y Minera (4.3%), Groupo Asur (4.2%), British American Tobacco (3.8%) and Unilever Indonesia (3.4%).

This fund could also appeal to income seekers, as shares in the trust currently offer a yield of 4.2%.

The post Looking for your first investment? Consider these growth and income trusts appeared first on The Motley Fool UK.