With this being the case, I think it’s best to leave the challenge of picking dividend stocks to the professionals. So today, I’m looking at my two favourite income investment trusts for 2019.

Income and growth

My first pick is the Lowland Investment Co (LSE: LWI). Managed by James Henderson and Laura Foll, this investment trust tries to pick equities across the spectrum. The managers (who have several decades of experience picking stocks between them) like small and mid-cap stocks for their growth potential, but also like large-cap stocks that produce a steady level of income.

Over the years this has proven to be a potent combination. The trust currently supports a dividend yield of 4.1% and over the past five years has churned out steady capital gains averaging around 2% per annum, although, like the rest of the market, the share price has suffered significantly in recent months. Over the past 12 months, the Lowland share price is down 11%, slightly more than its benchmark loss of 8.7%.

Still, I think in the long term this company should prove to be a winner particularly when you include reinvested dividends. At the time of writing, the shares are trading at a discount of around 0.6% to the net asset value (the five-year average is 2.9%), and the annual management charge is 0.57%, which is relatively modest.

If you are looking for income, it is worth keeping an eye on this trust in my opinion.

Overseas income

Lowland is a UK-focused investment trust, so its performance is tied to that of UK markets. In comparison, the Schroder Oriental Income Fund (LSE: SOI) can hunt for income around the world. 

According to the fund’s latest update, around 16% of its assets are invested in Hong Kong, 13% in China, 13% in Australia 11% in South Korea and the rest across other regions around the world. Only 6.2% of the fund’s net asset value is invested in UK equities.

Schroder Oriental was first launched in 2005, and since then it has proven itself as an income play. At the time of writing, shares in the trust support a dividend yield of 4.2%. Over the past 10 years, every £10,000 invested has grown into £39,000 with dividends reinvested, a compound annual return of 16.3% per annum for investors.

While past performance is no guide to the future, I think this trust can continue to produce at least mid-single-digit per annum returns for investors after including dividends for the foreseeable future. Economic growth across Asia is showing no signs of slowing down, and for UK investors, Schroder Oriental offers great diversification away from the uncertainty of Brexit.

Right now the firm is trading at a small premium to net asset value of 2.2% compared to the 12-month average of 0.1%. The ongoing annual management charge is 0.84% per annum, which I think is relatively modest considering the level of returns the trust has produced over the past decade.

The post My top 2 ‘income’ investment trusts for 2019 appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share 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.

Any more profit warnings?

Over the past two years, the group has issued one profit warning after another and while investors have been waiting for management to capitalise on the company’s core strengths, it just is not happening.

Cobham is a leader in two niche areas. It holds a virtual monopoly in air-to-air refuelling of aircrafts and is the sole provider of sophisticated data and voice communications equipment to Airbus as part of the latter’s aviation safety and connected cockpit programme.

However, in recent years management has been on a rather expensive acquisition spree which added a significant debt burden and diluted these two niche segments. And its balance sheet problems are unlikely to end until it can deal with its Boeing issues. The two companies are tangled in a disruptive dispute about their partnership on Cobham’s KC-46 aerial refuelling programme. Boeing has been making “unquantified damages assertions” and withholding payments.

As a result of slumping sales, falling profits and unpredictable earnings, the shares fell over 25% in 2018. However, the company still has a P/E ratio of almost 28 and so doesn’t have the kind of value appeal enjoyed by some other falling stocks. In 2017, it cancelled its dividend payment, which it had made for over 40 years in a row.  As it has not yet resumed payments, it is not a dividend recommendation either. 

If you are considering Cobham for your 2019 portfolio as a potential value or defensive play in this volatile market, you may want to wait for more guidance from the company before you hit the buy button. 

Higher earnings for Britvic

If you want to find plenty of British companies with growing profits, then the FTSE 250 is a good place to look. I would, for example, take a closer look at Britvic (LSE: BVIC), a leading producer of soft drinks.

You are probably familiar with its products, including Robinsons, Tango, and J2O. The group also holds the exclusive rights to make and market Pepsico‘s global brands in the UK.

In late November, it reported a 5% increase in revenues and increased its dividend, giving investors a 3.5% yield. BVIC’s bottom line had not been affected by the UK government’s recent sugar tax as consumers continued to buy and as others have moved to lower sugar alternatives, I believe the firm will continue to benefit from an increase in sales of its sugar-free fizzy drinks.

In addition to its UK operations, through franchising, export sales and licensing, management has been increasing its reach overseas, including sizeable operations in Ireland, France, and Brazil.

The P/E ratio stands at 18 for now. I expect the company to continue to grow and to increase earnings in years to come so I am currently comfortable with this number. If you are looking for shares to buy and hold, I would include Britvic in this year’s portfolio list.

The post Why I’d still avoid Cobham and raise a glass to this FTSE 250 share instead appeared first on The Twelfth Magpie.

More reading

• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?
• Will SpaceX, Nvidia, or Alphabet be the first $10trn stock?
• Up 95%! This FTSE 100 stock’s outperformed Nvidia over the past year
• With a 9.3% yield, is this an amazing opportunity to consider buying dirt-cheap Taylor Wimpey shares?
• How much do you need in a Stocks and Shares ISA to aim for £375 a week in retirement?

tezcang has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Britvic. 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.