Income heroes

The most consistent ‘dividend heroes’ can now be named as Caledonia Investments (LSE: CLDN), the Bankers Investment Trust (LSE: BNKR) and JPMorgan Claverhouse Investment Trust (LSE: JCH). These investment trusts have the distinction of raising their dividend by more than inflation every single year — without interruption — for two decades, according to new research from investment platform AJ Bell.

As well as offering consistent dividend growth, Caledonia and Bankers generated a total return of a massive 580.4% and 474.3%, respectively, over the last 20 years, while also increasing dividends by 5.3% and 6.5% a year on average. The beauty of a rising dividend is that it helps you beat the eroding effect of inflation, and give you a steadily growing income in retirement.

I’ve included long-standing investment trusts F&C and Witan in the table below, because they also deserve respect for increasing their dividends by 7.2% and 6% a year, respectively, over the same 20-year period.

Caledonia, which can trace its roots back to 1878, currently has around £2bn under management. It runs a concentrated portfolio of international investments and funds, targeting proven businesses with long-term growth characteristics and the ability to deliver rising income. This is no closet benchmark tracker. Its 10 largest holdings are mostly unfamiliar names to me such as Deep Sea Electronics, Cobehold and Buzz Bingo, although Microsoft was really recognisable at number 10.

As Alan Oscroft recently noted, Caledonia has now increased its dividend for 52 consecutive years, yet it currently trades at a massive discount of 16.3% to net asset value.

Bankers Investment Trust aims to beat the FTSE World Index for capital growth while generating annual dividend growth above the UK retail prices index, again by investing in global listed companies. It’s 30% invested in North American, with slightly less cover in the UK, while the remainder of its £1.17bn portfolio is divided between Europe, Asia-Pacific and Japan.

Mainstream

Here the stock picks are a lot more mainstream, with American Express, Microsoft, Berkshire Hathaway, MasterCard and Visa figuring in its top 10 holdings. The discount isn’t as generous, with just 2.11% to net asset value, but its differing holdings mean it could nicely complement Caledonia in your retirement portfolio.

JP Morgan Claverhouse is a UK equity income fund with a conviction portfolio of between 60 and 80 stocks. It’s also a smaller fund, with £434m under management, and returns are impressive given how the UK has underperformed compared to many global markets. It currently trades at a discount of 4.7% to net asset value.

These three investment trusts could give you all the joys of rising growth and income, with none of the trouble of dealing with buy-to-let tenants.

The post Forget buy-to-let! I’d buy these 3 investment trusts for growth and income appeared first on The Twelfth Magpie.

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• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
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Harvey Jones has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Mastercard and Visa. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Today, I’m profiling two investment trusts that could make excellent core holdings for beginner investors. 

Bankers Investment Trust

The Bankers Investment Trust (LSE: BNKR) aims to maximise returns for investors by trading in a diversified portfolio of international shares. The portfolio manager has the flexibility to invest in any geographic region and focuses on companies that generate significant cash flow and pay regular dividends. The trust also aims to pay a regular dividend to shareholders that grow at a rate in excess of RPI inflation.

An analysis of the current portfolio reveals that BNKR has the most exposure to US, UK and Japanese equities. The top sector weightings are financials and technology and the top five holdings include BP, Apple, British American Tobacco, American Express and Microsoft. I like the fact that while this trust has exposure to US stocks, it’s not overly exposed to some of the more expensive tech stocks. 

The trust’s performance over the last five years to the end of February has been excellent, with the net asset value (NAV) rising a healthy 83%. The current dividend yield on the trust is 2.25%, with dividends paid quarterly. Fees are very reasonable, with the ongoing charge a low 0.44%. So overall, I believe this trust is an excellent choice for beginner investors.

Murray Income Trust

Another excellent choice for those looking to keep things simple is the Murray Income Trust (LSE: MUT). This trust places a strong focus on income/dividends and aims to provide investors with a high and growing income stream, along with some capital growth as well. It invests predominantly in UK equities although it does have the flexibility to invest 20% of its assets in international stocks.

Looking under the bonnet, the trust currently has an 83% weighting to UK stocks, with smaller allocations to counties such as Switzerland, Sweden, Denmark and the US. The largest sector weightings here are financials and consumer defensive with the top five holdings including Unilever, AstraZeneca, British American Tobacco, Prudential and Royal Dutch Shell.

The Murray Income Trust also pays dividends on a quarterly basis and the current yield is a healthy 4.5%. Over the last five years to the end of February, the portfolio’s net asset value (NAV) increased 39%. Ongoing fees are reasonable at 0.72% per annum.

It’s worth noting that this trust currently trades with a discount of 7% to the assets in the portfolio. As a result, I believe now could be an excellent time to add the trust to an ISA.

The post Two top investment trusts for a starter ISA portfolio appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Edward Sheldon owns shares in the Murray Income Trust, Unilever and Royal Dutch Shell.  Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool’s board of directors. LinkedIn is owned by Microsoft. The Motley Fool UK owns shares of and has recommended Apple and Unilever. The Motley Fool UK has the following options: long January 2020 $150 calls on Apple and short January 2020 $155 calls on Apple. The Motley Fool UK has recommended American Express, AstraZeneca, BP, and Royal Dutch Shell B. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Even during the recent financial crisis, when many companies were forced to cut their dividends or even stopped payouts altogether, many investment trusts managed to continue to increase their shareholder payouts. As such, there are a number of trusts with multi-decade-long track records of rising payouts today.

Why?

This is because investment trusts, unlike many open-ended funds, are not required to pay out all of the dividends generated by their underlying equity portfolios. They can hold back up to 15% of the dividend income they earn to supplement payments to shareholders in leaner years, smoothing out their dividend payments over the long term.

And following a rule change in 2012, investment trusts now have even more flexibility. They are even allowed to fund dividends out of capital returns, meaning that should their revenue reserves run out, they can sell some of their investments to make dividend payments.

Inflation-beating dividend growth

The £1bn-plus Bankers Investment Trust (LSE: BNKR) has one of the longest track records of consecutive years of dividend increases, with 50 years under its belt, according to data from the AIC.

Although shares in the investment trust yield just 2.2%, a major attraction of Bankers is its dividend growth. Not only does it plan to raise dividends each year, but it is targeting inflation-beating regular dividend growth of more than the rise in the Retail Price Index.

The trust also aims to achieve long-term asset growth in excess of the FTSE All-Share Index by means of its flexible investment approach and broadly diversified international equity portfolio. Big multinationals dominate its portfolio, with BP (1.8%), Apple (1.7%), British American Tobacco (1.5%), American Express (1.5%), and American Tower (1.4%) being its top five positions.

Performance figures for the past five years are encouraging as shares in the fund delivered a total return of 123%, easily beating its benchmark index performance of just 63%.

Diverse range of investments

Caledonia Investments (LSE: CLDN) became the latest trust to reach the impressive milestone of 50 years of consecutive dividend increases earlier this year.

Unlike Bankers, Caledonia is self-managed and owns a very diverse range of underlying investments. And one thing which really sets the it apart from many of its peers is that it invests around 27% of the value of its portfolio value in unquoted companies, which gives those trusting it with their cash exposure to a sector which is generally reserved for private equity investors.

Despite its strong dividend growth record, Caledonia trades at a rather big discount to its net asset value (NAV). Although this is partly due to the difficultly in valuing its unlisted equity investments, recent moves made by the fund manager should allay some of the concerns.

The fund recently sold down some of its unquoted investments, including a £197m stake in Park Holidays, in order to realise value for shareholders. And with the proceeds of the sale, it paid a special dividend of 100p per share in August, demonstrating that it is a shareholder-friendly fund.

At its current share price, Caledonia Investments currently trades at a 19% discount to NAV, with a regular dividend yield of 2%.

The post Looking for steady income? Consider these dividend investment trusts appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Jack Tang has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Home and away banker

Few are more venerable than the £962m Bankers Investment Trust (LSE: BNKR), founded in 1888 and now managed by Janus Henderson Investors, which published results for the half-year ended 30 April this morning. Its diversified international portfolio has delivered a total return of 120% over five years, against 100% for its global benchmark, according to Trustnet.com. The board has also increased its dividend for 50 consecutive years – that’s right, 50 – and it currently yields a steady 2.2%.

Today’s results show net asset value (NAV) up 7% over six months, pretty much in line with the FTSE All-Share at 7.1%, and an even more impressive 31.3% over 12 months, outpacing the All-Share’s 20.1%. It has been helped by the post-Brexit plunge in the pound, which lifted the value of its global portfolio when translated into sterling.

Go West

Bankers’ increased weighting to North America has helped performance, although it has been scaling back its exposure on valuation concerns and fears about the impact of US interest rate hikes on investor sentiment. It is shifting asset allocation towards continental Europe and Asia, where valuation and yields are at a relative discount.

Its European holdings grew strongly over the period, rising 9.7%, followed by China at 9.3%, impressive given that the local index fell 4.4%. Japanese and Pacific exposure floundered. The board is projecting 6% dividend growth this year, helped by its international holdings, special dividends from UK companies and the positive translation of overseas dividends into sterling. Currently, it trades at a 5.5% discount to NAV and the annual charge is just 0.45%. You can buy this trust and largely forget about it, until you need retirement income.

North of the border

The £1.8bn Caledonia Investments (LSE: CLDN) is another golden oldie, tracing its history back to the shipping empire established by Sir Charles Cayzer in 1878. Today, the Cayzer family still owns just under half of the share capital. It is up 120% over five years and 28% over 12 months, Trustnet shows, and also boasts the proud record of increasing its dividend for 50 consecutive years. Currently, the yield is 1.93% and is trading at an even wider discount of 16.81% to NAV. However, it does have a relatively high ongoing charge of 1.14%.

The £843m Scottish Investment Trust (LSE: SCIN), founded in 1887 has offered 33 years of consecutive dividend growth and currently yields 1.67%. Its five-year total return is a robust 97%, and 26% over 12 months. The trust currently trades at a discount of 8.33% to NAV, with ongoing charges of just 0.59% a year.

Global reach

Bankers and Scottish have large UK and US exposures, which combined, account for roughly half of each trust’s global exposure, but this falls to just 10% for Caledonia. Together these three trusts could give you all the diversification you need.

The post These 3 global investment trusts could help you retire early appeared first on The Twelfth Magpie.

More reading

• Why Barclays shares could have a huge second half of 2026
• Back below 500p, is it time to consider BP shares again?
• Is there any value left in Lloyds shares now they’re over £1?
• How much would I need in a Stocks and Shares ISA to target £19,036 a year in second income?
• After huge new nuclear deals, are Rolls-Royce’s sub-£15 shares set to power higher?

Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.