Investment trusts can be great ways to target a substantial and reliable dividend from passive income stocks. They can be diversified across hundreds of companies spanning sectors and regions. The result? A more predictable passive income over the long term, as one or two dividend shocks can be better absorbed.
Two trusts in particular have caught my eye lately. Each owns a robust portfolio of market-leading companies with strong balance sheets, making them perfect for dividend chasers. And their dividend yields sail past the FTSE 100 average of 3% to 4%.
These are:
- Henderson Far East Income (LSE:HFEL) — 9% dividend yield.
- Schroder Real Estate Investment Trust (LSE:SREI) — 7.8% dividend yield.
Here’s what makes them excellent UK-listed income stocks to consider.
Look East
Henderson Far East Income is designed to provide
a growing total annual dividend per share, as well as capital appreciation, from a diversified portfolio of investments from the Asia Pacific region.
This focus on fast-growing regions means a huge dividend yield and steady payout increases. Indeed, dividends here have risen every year since the early 2000s. But that’s not all, as — like other emerging market stocks and trusts — it has also enjoyed stunning share price gains. It’s risen 25% in value over the last year.
It’s important to note the share price performance of Henderson’s trust has been bumpier over a longer timescale. This could remain so, like other Asia-focused investments. But as China’s economy picks up steam again and buoys the broader continent, I’m optimistic the trust can keep outperforming.
In total, Henderson Far East Income holds shares in 72 companies, providing particularly strong exposure to financial services and information technology.
A top REIT?
Schroder Real Estate Investment Trust isn’t designed to hold a portfolio of income-paying stocks. Instead, its goal is to deliver
an attractive level of income and the potential for income and capital growth from owning and actively managing a diversified portfolio of UK commercial real estate
Its official status as real estate investment trust (REIT) has large positive implications for dividend investors. These companies receive juicy tax breaks. And in return, at least 90% of yearly profits from their rental operations must be paid to shareholders.
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.
Here’s the thing, though. This alone doesn’t guarantee a large and reliable dividend income. With exposure to cyclical sectors like offices, retail and industrial, could the trust’s rent collection and occupancy suffer during downturns? It’s possible.
However, its large portfolio of 33 properties significantly cut the risk of such disruptions. It also enjoys an average lease term of over five years, giving it further solid earnings visibility.
A £1,680 income opportunity?
The average dividend yield on Henderson Far East Income and Schroder Real Estate Investment Trust is 8.4%. At this level, a £20,000 investment spread equally across them will deliver a £1,680 passive income just for 2026. I think both demand serious consideration.
Should you invest £5,000 in Henderson Far East Income right now?
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And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if Henderson Far East Income made the list?
Royston Wild does not hold any positions in the companies mentioned.
