A discount on a range of companies and assets

One such share I think is Temple Bar Investment Trust (LSE: TMPL) which has a dividend yield of over 7%. On top of that, the discount to net asset value is around 10%. This is a great combination and makes the shares great value in my opinion.

The trust has a gearing of around 13.3% which is higher than some other similar trusts and this does add some risk, especially when the market falls.  

At the end of March, the trust had Royal Dutch Shell and Barclays and RBS as its third, fifth, and sixth biggest holdings respectively. It’ll be interesting to see if that’s changed in light of dividend cuts.

13.3% of the trust is in cash with further hedges provided by 2.9% being in physical silver and gold. The heavy weighting towards big UK companies at a time of dividend cuts is slightly concerning, but for now, I think the big cash position should see it through.

The limping asset manager

Jupiter Fund Management (LSE: JUP) combines a yield of 7.5% with a price-to-earnings ratio that is under eight. This indicates to me that the shares are very cheap.

Jupiter is looking to scale up its business by buying growth. In February Jupiter agreed to acquire Merian Global Investors for £370m. It has since stated the deal will go ahead despite the economic uncertainty at the moment.

Both asset managers have been hit by outflows which makes the deal challenging but Merian does have margins of around 50% which is very high, even in this industry. Merian will also boost earnings per share from 2021 as well which is good for management and shareholders.

This isn’t a business that’s firing on all cylinders, but that gives it the potential to recover from a low base. I think the shares look cheap and could be worth a look, especially with a long-term mindset.

Relying on squeezed marketing budgets

WPP (LSE: WPP) is one of those businesses that suffers during a downturn. But assuming any economic downturn isn’t too long-lasting I expect it offers value at the current depressed price. I’m tempted to pick up more of the shares.

That’s because the P/E is now under eight, which puts it on a very similar level to Jupiter. What that shows is many investors are fearful for the future. But if management can keep slimming the business down and further cut debt, while keeping the agencies in the business performing well, then I’m optimistic about WPP’s future.

Conventional wisdom is that companies should reduce marketing spend during a recession. However, there is academic evidence that actually it might be the best time to spend and gain market share, as less well-financed competitors struggle. If enough companies take this view, WPP could do well and for now, the shares are embarrassingly cheap. 

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The growth share opportunity

Shares in property tech group Rightmove (LSE: RMV) had a strong 2019, especially in the later months. Given the huge impact of coronavirus on the property market, it’s little wonder this year has been different with the share price now down over 25%.

Before the crash though, the company had been a great investment. Since listing in 2006, Rightmove generated more than a whopping 1,500% return for investors. Has everything fundamentally changed? I’d argue not. People will, once the housing market returns back to some kind of normality, use websites to search for houses. Therefore, estate agents will pay to advertise on these platforms.

Unusually for a technology company, Rightmove is hugely profitable. Pre-tax profit for 2019 increased to £213.7m from £198.6m the year before. 

The next few months will be tough for the property market. And likely, Rightmove investors who bought the shares in the boom years will have been hit hard. However, the shares are starting to look increasingly attractive now and I’d be tempted to buy if the market dips again.

Another one that was charging up 

Shares in Rank Group (LSE: RNK), the owner of Grosvenor Casinos and Mecca Bingo, have also been hit hard recently. So far in 2020, they’re are down 40%. However, over 12 months, the shares are up, just. That shows us just how strongly the share price was rising pre-coronavirus.

It had been doing well as the group continued to raise expectations on the back of strong results and a £116m acquisition of Stride Gaming. On 30 January, it announced its interim results for the six months ended 31 December, reporting group underlying net gaming revenue grew 10% in the period to £377.5m. Underlying operating profit also rose 70% to £55.1m

Like other leisure businesses, Rank has had to close many venues. However, it does produce significant digital revenues in the UK and Spain. So I think the shares could now be in bargain territory, especially given digital accounts for £20.7m of operating profit, and this could grow.  

A diversified holding with potential

For those concerned about volatile markets, opting for investment trusts may help to ease nerves. Ones like Temple Bar Investment Trust (LSE: TMPL) will be able to keep paying dividends as they can hold reserves to see them through times like these.

They also hold shares in a wide range of companies, giving them more diversification. That’s ideal when many shares are falling heavily and others are cutting dividends. 

Temple’s holdings include about 20% cash, 5% gold and silver, and 75% shares. The top shares it owns are Travis Perkins, BP, Royal Dutch Shell, Grafton Group and Barclays. Quite a few of these positions have been added to since February, indicating management thinks they might be undervalued.

The shares have a dividend yield of 7% and trade at a small discount to net asset value. I believe this trust could be a profitable investment.

The post Forget Premium Bonds. I think these shares could make you richer appeared first on The Motley Fool UK.

But unless you’re starting with a large amount of start-up capital, the transaction costs of investing in a large diversified portfolio can be expensive. Instead, it may be better to use investment trusts to get exposure to the market.

These can be a great way for investors to buy and hold over the long term. They enable people to pool their money together to get exposure to many different companies via a single investment vehicle.

Income and growth

With this in mind, the Temple Bar Investment Trust (LSE: TMPL) is one fund to consider for anyone seeking both income and growth. The trust invests primarily in UK equities, across different sectors, seeking undervalued stocks.

The fund managers use a contrarian approach in seeking “unloved, misunderstood or forgotten stocks”. It intends to hold stocks for long periods, typically around four or five years, and aims to have a slow-but-steady turnover of its portfolio holdings.

Its top five holdings are well-recognised large-cap names, including Shell (6.3%), HSBC (6.2%), GlaxoSmithKline (5.9%), BP (5.3%) and Barclays (4.6%).

Dividend increases

The business is particularly suited to its investment trust structure as it enables the fund keep some of its dividend income in reserve, allowing it to top up income in lean years and smooth out dividend payments across the cycle. This, combined with the conservative management of its portfolio, has enabled the fund to raise annual dividends for 34 consecutive years.

This is an impressive feat, especially given that it is one of the higher yielding investment trusts on the market. With shares in the Temple Bar Investment Trust currently trading at a 5% discount to its net asset value (NAV), the fund currently offers a dividend yield of 3.2%.

It has low costs, with an ongoing charge of 0.49%, which includes a management fee of 0.35%.

Low cost

The Independent Investment Trust (LSE: IIT) is another low-cost option to consider. With ongoing charges of just 0.25% last year, the fund is one of the cheapest on the market.

The Independent Investment Trust seeks to provide good absolute returns over long periods by investing in UK and international equities. Its portfolio consists predominantly of UK companies, but there is a broad spread across large-cap, mid-cap and small-cap names.

The fund consistently keeps portfolio turnover very low, which reduces transaction costs, and is known to hold many of its investments for long periods. Its long-standing position in premium mixer drinks company Fevertree Drinks, which is currently its top position, has been a significant contributor to its recent outperformance. Elsewhere, it is overweight in the retail sector, following recent new purchases in Footasylum and Quiz.

On the downside, shares in the investment trust are expensive. They trade at a 14% premium to its NAV, as the fund is in high demand following strong recent gains. Over the past five years, it has delivered a total return of 157%, against the FTSE All-Share gain of 46%.

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The best strategy for novice investors, in my view, is to invest in a fund. That way, your money will be spread out over a whole portfolio of stocks, meaning your risk is reduced significantly.

There are several different types of funds available today, including mutual funds, investment trusts and exchange-traded funds (ETFs). I explained the differences recently here. Today, I’m looking at two investment trusts that I believe are strongly suited to those just starting out. Both can be bought and sold just like regular stocks through an online broker.

The City of London Investment Trust

The City of London Investment Trust (LSE: CTY) is a perfect investment trust for beginners, in my opinion. It’s a diversified portfolio of around 120 stocks that aims to provide long-term growth in income and capital.

The reason this is suited to beginners is that it is managed in a very conservative fashion. It generally invests in well-known blue-chip companies such as Royal Dutch Shell, HSBC Holdings and Unilever and therefore offers a strong degree of stability. The top 10 holdings are shown below:

Source: janushenderson.com. Data as of 31/12/17. 

For the five years to the end of December, the net asset value (NAV) of the trust increased 73%, comfortably beating the return of the FTSE All-Share index, which was 63%.

Furthermore, CTY has an excellent dividend track record, having increased its payout every year for over 50 years now. The current yield is just under 4% and shareholders receive their dividends on a quarterly basis. Management fees are also low at just 0.37%.

I hold CTY in my own portfolio, and I plan to keep holding it for a while to come, enjoying the steady stream of dividends. To my mind, it’s a fantastic core holding.

Temple Bar Investment Trust

Another very similar investment trust, also well suited to beginners, is the Temple Bar Investment Trust (LSE: TMPL).

Launched in 1926, this one aims to provide growth in income and capital, with the portfolio manager specifically targeting undervalued, out-of-favour companies that have strong balance sheets.

TMPL mainly invests in blue-chip companies, and currently has large positions in HSBC Holdings, Royal Dutch Shell, and GlaxoSmithKline. The top 10 holdings are shown below.

Source: templebarinvestments.co.uk. Data as of 31/12/17. 

This trust could also appeal to dividend seekers, as it pays its dividends on a quarterly basis as well. The payout has been increased for 33 consecutive years now, although the yield is a little lower than CTY’s, at 3.1%.

The long-term performance of the trust is solid, with the NAV increasing approximately 70% for the five years to the end of December. Ongoing charges are 0.51%.

Given its successful long-term track record, the Temple Bar Investment Trust looks to be an excellent fund for those investing their first £1,000.

The post Investing your first £1,000? Here are two investment trusts to consider appeared first on The Motley Fool UK.

Murray Income Trust

Run by Aberdeen Asset Management, the Murray Income Trust (LSE: MUT) is an investment trust that aims to achieve a high and growing income, combined with capital growth. The trust invests predominantly in UK equities, however it does have the freedom to diversify into international stocks. 

At the end of June, the top holdings in the trust included Unilever (4.5%), British American Tobacco (4.5%) and GlaxoSmithKline (4.5%), and the largest international positions were Roche (3.4%), Nordea Bank (3.1%) and Microsoft (2.5%). Sector-wise, the trust had the largest exposure to the financials, consumer goods and healthcare sectors. 

Dividends are paid quarterly, and the total dividend paid last year was 32.25p last year, equating to a yield of a healthy 4% at the current share price. The trust has an excellent dividend growth track record, having raised its payout 43 years in a row. Ongoing charges are 0.76%. 

Temple Bar Investment Trust

With 33 years of consecutive dividend growth, the Temple Bar Investment Trust (LSE: TMPL) is another trust that could appeal to dividend investors. 

Launched in 1926, it aims to provide growth in income and capital, and to outperform the FTSE All-Share Index on a total return basis. The trust invests primarily in UK securities, with the majority of portfolio holdings selected from the FTSE 350 index. The portfolio manager uses a contrarian approach to value investing, seeking out undervalued, out-of-favour companies with strong balance sheets. 

At the end of June, the three largest sectors in the trust were financials, cash & short-dated gilts and industrials. The top three holdings were HSBC Holdings (8.1%), GlaxoSmithKline (6.8%) and Grafton Group (5.2%).

Dividends are paid quarterly, and last year it paid out a total of 40.45p, equating to a yield of 3.1% at present. Ongoing charges are 0.51%. 

Merchants Trust 

Lastly, the Merchants Trust (LSE: MRCH) is another trust that has a strong focus on dividend-paying companies. Its objective is to provide an above-average level of income, income growth and long-term capital growth by mainly investing in higher-yielding FTSE 100 stocks. 

Established in 1889, the trust is managed by Allianz Global Investors, with the portfolio manager often looking to go against the herd and invest in high-quality stocks that are out of favour. At the end of June, the trust had the largest exposure to the financials, industrials and consumer services sectors, and the three largest holdings were GlaxoSmithKline (7.4%), Royal Dutch Shell (7.2%) and HSBC Holdings (5.9%).

The Merchants Trust has the highest yield of the three, with this year’s dividend payment of 24.2p equalling a yield of an impressive 5%. Dividends have been increased for 35 consecutive years and are paid on a quarterly basis. Ongoing charges are 0.58%. 

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Picking great dividend shares has helped Temple Bar outperform the FTSE All-Share Index over the past three, five and 10 years.

Not too many equity income funds currently have three banks in their top 10 holdings — especially with one of those banks not presently paying a dividend! But HSBC (LSE: HSBA), Lloyds (LSE: LLOY) and dividend-less Royal Bank of Scotland (LSE: RBS) all feature in Temple Bar’s top 10.

Going against the crowd

Temple Bar takes a contrarian approach, and sees little value in a number of areas of the market that are currently popular with dividend investors. For example, in its latest annual report, the trust said of utilities:

“We believe investors have been attracted to the high dividend yields of utilities. However, these dividends are typically financed partially out of debt rather than cashflow and, therefore, in our view, are not as attractive as they initially appear. Utilities remain highly capital intensive companies continually at risk of political intervention and these dividends may prove less secure than investors believe”.

Another swathe of popular dividend stocks — “quality businesses” — are also currently off the menu for Temple Bar:

“Many of these companies are found in consumer facing sectors such as food, drink, tobacco, personal care and household products. After many years of strong performance, this group of companies is priced as highly as it has been for decades, yet it is questionable whether its future is as bright as its past”.

With so many popular dividend areas of the market rejected, it’s perhaps not surprising that Temple Bar’s contrarian approach — where value can often take some time to emerge — has led the trust to see an opportunity in banks.

HSBC

HSBC’s shares reached a post-financial-crisis high of pushing £8 in 2013. But they’ve been nearer £6 since, as penalties for past misdeeds have rumbled on, new scandals have surfaced and fears about China’s economy have weighed on sentiment.

As a result of the depressed share price, the dividend yield is high — 5.4% forecast for this year, rising to 5.6% next year. The dividend is covered a reasonable 1.6 times by forecast earnings. HSBC could do with getting its costs down — it’s taking steps to do so — and could offer good value today for long-term investors.

Lloyds

Temple Bar has been invested in Lloyds since before the company’s resumption of dividends, noting shortly before the restart that the Black Horse “moves ever closer to paying a dividend. Once reinstated, this could grow quickly and it is conceivable that the company will have a 5% yield … within two years”.

Lloyds’ shares have lately been making new post-financial-crisis highs. However, investors today could still get Temple Bar’s hoped-for 5% yield within two years on a small pull-back in the shares or a modest upgrade to the analyst consensus forecast. As things stand, the consensus gives a 3.2% yield this year, rising to 4.8% next year.

RBS

Royal Bank of Scotland is behind Lloyds in its recuperation from the financial crisis by perhaps a year or two. RBS may or may not be able to resume dividends this year, and not all analysts are optimistic for 2016. As a result, there’s a lowly 1.5% yield forecast for 2016 — covered a whopping 4.7 times by forecast earnings, compared with Lloyds’ 1.9 times and HSBC’s 1.6 times.

At some point, RBS should get into the position Lloyds is currently in. And, at its current share price — which has gone nowhere for a couple of years — the Scottish bank has the potential for a similarly high dividend payout to Lloyds, for patient investors, such as Temple Bar.

The post What This Top Dividend Portfolio Is Holding Now: HSBC Holdings plc, Lloyds Banking Group PLC And Royal Bank of Scotland Group plc appeared first on The Motley Fool UK.

Picking great dividend shares has helped Temple Bar outperform the FTSE All-Share Index over the past three, five and 10 years.

I’m going to take a look at three of Temple Bar’s current favoured stocks: Lloyds Banking Group (LSE: LLOY) (NYSE: LYG.US), Royal Dutch Shell (LSE: RDSB)  and Direct Line Insurance (LSE: DLG).

Royal Dutch Shell

Temple Bar has a number of dividend “usual suspects” within its top 10 holdings, including GlaxoSmithKline, which recently announced a maintained Q3 dividend, and Royal Dutch Shell, which lifted its Q3 dividend by 4%.

The Anglo-Dutch oil giant has never failed to pay an annual dividend since the end of Word War II, and in the vast majority of years has increased the payout. In the Q3 results, management said: “We are on track for a programme of over $30bn of dividend distributions and buybacks for 2014 and 2015 combined”.

Analysts expect Shell to pay a full-year dividend of about 117p, giving a yield of just over 5% at a share price of 2,322p.

Direct Line Insurance

Direct Line is a less common top-10 holding among equity income funds, but Temple Bar has been invested in the company ever since it was demerged from the Royal Bank of Scotland in 2012. Temple Bar said at the time:

“Whilst we rarely invest in new issues we believed that an, ultimately, independent Direct Line operating outside of its erstwhile owner, the Royal Bank of Scotland could result in a number of operating efficiencies and consequently improve returns to shareholders”.

In the two years since flotation, Direct Line’s shares have risen from 175p to 278p, and the company has paid out 25p a share in ordinary dividends and 18p in special dividends. The group has also recently agreed the sale of its international division and says that “substantially all of the net proceeds [about 10p a share] will be returned to shareholders”.

Lloyds Banking

Lloyds and Royal Bank of Scotland, neither of which currently pays a dividend, are even less common holdings for equity income funds than Direct Line. Temple Bar has held Royal Bank of Scotland (currently one of its top-10 holdings) for some time, but has recently also built a position in Lloyds, as well as US company Citigroup — “two banks which have significantly restructured over the last few years, but which we believe have market positions and levels of profitability not fully reflected in their valuations”.

Lloyds is aiming to develop into a top dividend company once it gets regulatory permission to restart dividend payments. Capital “stress tests” may put a damper on a dividend for the current year (analysts are forecasting a token 1p a share); and investors may have to wait for 2015, for which the analysts have pencilled in a payout of about 3p, giving a yield of 3.9% at a current share price of 77p.

The post What This Top Dividend Portfolio Is Holding Now: Lloyds Banking Group PLC, Royal Dutch Shell Plc And Direct Line Insurance Group PLC appeared first on The Motley Fool UK.

Temple Bar Investment Trust

Let’s take a look at the trust’s current top three holdings: HSBC (LSE: HSBA) (NYSE: HSBC.US), Royal Dutch Shell (LSE: RDSB) and GlaxoSmithKline (LSE: GSK).

HSBC

At 597p, the shares of banking behemoth HSBC are trading close to a 52-week low. Concerns about China’s property market and borrowing levels have been weighing on investor sentiment towards companies with a high exposure to Asia — HSBC, of course, falls into that category.

However, it’s not just a matter of China worries. Real business performance has also hurt the share price. Management said at the company’s AGM in May that the first quarter was “relatively slow” compared with last year, and that “We expect 2014 to present challenges as well as opportunities”.

While analysts have been downgrading their earnings forecasts, HSBC is nevertheless expected to pay a dividend of around 31p for the year (covered 1.7 times by earnings), giving a juicy yield of 5.2%. That’s a full 2% higher than the FTSE 100 as a whole — and management is optimistic about Asia’s long-term growth story and the company’s ability to grow the dividend.

Royal Dutch Shell

In contrast to HSBC, oil titan Royal Dutch Shell is trading close to a 52-week high, at a share price of 2,550p. The market appears to be warming to new boss Ben van Beurden’s strategy of more disciplined capital investment, and improving returns and cash flow performance.

In first-quarter results at the end of April, the Board upped the first of this year’s quarterly dividends by 4%, saying that the increase “Underscores our delivery in recent years, and our confidence in the future potential”.

Analysts are forecasting a full-year dividend of 112p (covered 1.9 times by earnings), giving a yield of 4.4%.

GlaxoSmithKline

Despite concerns about patent expiries, the shares of GlaxoSmithKline (GSK) have made good progress over the last five years. Currently changing hands for 1,575p, the shares are up about 45% over the period.

Decent pipeline news and a well-received deal with fellow pharmaceuticals giant Novartis earlier this year have helped, while a corruption scandal in China and an announcement in May that the UK’s Serious Fraud Office is investigating GSK’s commercial practices haven’t done too much damage.

The Board lifted this year’s first-quarter dividend by 6%, and analyst forecasts of an 81.5p payout for the full year make GSK another company offering a stonking income: 5.2%. The dividend is expected to be covered a slightly thin 1.3 times by earnings, but the cover is set to improve thereafter.

The post What This Top Dividend Portfolio Is Holding Now: HSBC Holdings plc, Royal Dutch Shell Plc and GlaxoSmithKline plc appeared first on The Motley Fool UK.

Picking great dividend shares has helped Temple Bar outperform the FTSE All-Share Index over the past three, five and 10 years.

Let’s take a look at Temple Bar’s current top three holdings: GlaxoSmithKline (LSE: GSK), HSBC Holdings (LSE: HSBA) and Vodafone (LSE: VOD) (NASDAQ: VOD.US).

GlaxoSmithKline

Leading FTSE 100 pharma firm GlaxoSmithKline released satisfactory first-half results a couple of weeks ago. The drugs and consumer healthcare giant reaffirmed its full-year guidance of core earnings per share (EPS) growth of 3-4%, with turnover growth of around 1% (both at constant exchange rates).

The board declared a second-quarter dividend of 18p, the same as the first-quarter. The 36p payout to date represents a 5.9% increase on the same period last year. In the circumstances, the analyst consensus of 4% growth for the full year looks a little mean. However, the consensus for 2014 is for growth to accelerate to 6.8%.

At a recent share price of 1,671p, GlaxoSmithKline offers a dividend yield of 4.6% based on the 2013 forecasts, rising to 4.9% for 2014.

HSBC

Banking behemoth HSBC reported big growth numbers for profit and EPS within its half-year results announced earlier this week. However, the numbers weren’t quite as big as analysts were hoping for and the market was underwhelmed. The shares are currently down over 7% on their closing price last week.

The board announced a dividend of US$0.10 (up 11.1%) for the second quarter, delivering on a commitment made at the start of the year for that level of payout in each of the first three quarters. Analysts are expecting double-digit growth to be maintained for the full year, with more of the same for 2014.

At a recent share price of 704p, HSBC offers a dividend yield of 4.8% on 2013 forecasts, rising to 5.4% for 2014.

Vodafone

Telecoms titan Vodafone reported a mixed picture within its most recent trading update last month, but the chief executive told shareholders: “Although regulation, competitive pressures and weak economies, particularly in Southern Europe, continue to restrict revenue growth, we continue to lay strong foundations for the longer term”.

Vodafone’s share price continues to be buoyed by talk of a telephone-numbers-sized deal for its stake in US operator Verizon Wireless. If such a deal did happen it would obviously have potential implications for Vodafone’s dividend. The company would lose the ongoing cash flow from Verizon but would gain a whopping great pile of cash in one fell swoop.

In the meantime, Vodafone this year changed its dividend policy from at least 7% annual growth to the rather less appealing at least maintain the dividend at current levels. However, analysts are forecasting some growth in the payout this year and next — giving yields of 5.2% and 5.4%, respectively, at a recent share price of 199p.

Happy retirement!

If you already have GlaxoSmithKline, HSBC and Vodafone tucked away in your portfolio and are in the market for more blue-chip dividend dynamos, I recommend you help yourself to the very latest free Motley Fool report.

The Fool’s top analysts have identified five companies they believe will generate superior long-term growth in earnings and dividends. Such is their conviction about the quality of these businesses that they’ve called the report “5 Shares To Retire On“.

You can download this free report right now — simply click here.

> G A Chester does not own any shares mentioned in this article. The Motley Fool has recommended shares in GlaxoSmithKline and Vodafone.

The post What This Top Dividend Portfolio Is Holding Now: GlaxoSmithKline plc, HSBC Holdings plc And Vodafone Group plc appeared first on The Motley Fool UK.