With this in mind, I’m considering these two high-yielding investment trusts for my ISA this year.

Infrastructure fund

First is the John Laing Infrastructure Fund (LSE: JLIF). This trust, which invests in a diversified portfolio of predominately government-backed infrastructure projects, is attractive because it delivers stable, predictable income, with the possibility of some capital appreciation.

Infrastructure assets have for many years been a popular choice among sovereign wealth funds and professional investors. This is because, as they earn stable long-dated cash flows from essential physical assets, infrastructure investments are ideal for investors who are looking to generate long-term stable returns.

It’s not a widely-held asset class for retail investors due to the difficulty in accessing the market, but thanks to the closed-ended structure of investment trusts, retail investors can easily gain broad exposure to such assets via investment companies such as this fund.

Portfolio

Altogether, the John Laing Infrastructure Fund has 65 infrastructure PPP projects, diversified by both geography and sector. The fund targets an internal rate of return (IRR) of between 7% to 8%, and its fund manager currently charges a management fee of around 1% annually on the fund’s adjusted portfolio value.

It is worth noting that it was affected by the collapse of Carillion. The troubled construction firm was the facilities management provider for 8.5% of its portfolio value at the time of liquidation, leading it to expect an adverse impact on its NAV of £3m. This shows that although infrastructure assets tend to be reliable defensive investments, investors can still be exposed to operational risks.

Following a 2.5% increase in its final dividend to 3.57p per share, shares in the fund currently yield 6.2%, while trading at a 10% discount to its NAV.

Higher yield

For an even higher yielding investment, I’m considering Blackstone/GSO Loan Financing Limited (LSE: BGLF). Shares in the fund offer a market-beating yield of 10.7% via investments in the European and US secured loan market.

Now, as indicated by its much higher yield relative to investment-grade corporate and government bonds, it’s obvious that the fund is invested in riskier forms of debt. In fact, the vast majority of its picks are held in sub-investment grade loans.

High-yield loans come at risk of greater chances of default, although in good economic times their greater yields often more than offset that risk, enabling them to typically generate a better rate of return than safer, higher-quality loans.

The main reason I’m particularly keen on this fund over similar offerings in the investment trust space is because it’s run by the massive private-equity group Blackstone. I reckon this gives it an advantage in finding attractive investment opportunities, as Blackstone offers the fund scale in the huge secured loan market.

Clearly, this isn’t a fund that’s suitable for every investor, but if you’re prepared to take on slightly more risk for more income, the addition of this one to your portfolio could seriously boost its average yield.

The post 2 high-yield dividend investment trusts I’d consider for my ISA appeared first on The Twelfth Magpie.

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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.

I believe the market has overreacted in the case of this trio of companies and that now could be a great opportunity to buy a slice of what I view as very attractive businesses for long-term investors.

Discount prices

The shares of HICL, INPP and JLIF are 20%, 12% and 19% below their 52-week highs and down 11%, 7% and 9% from the day before Carillion went into liquidation on 15 January. The table below shows net asset value (NAV) and dividend data for the three firms.

As you can see, HICL and JLIF are now trading at discounts to NAV and INPP at a small premium. All three companies offer generous dividend yields, based on their trailing 12-month payouts. All three have also issued updates since Carillion’s collapse. How do these bear on their valuations?

The Carillion factor

HICL: Carillion provided facilities management (FM) to 10 (14% by value) of the 116 projects HICL is invested in. It was not the contractor on any of HICL’s current construction projects, but there are five projects where Carillion was the original construction contractor and, at the time of the liquidation, held responsibility for latent defect risk. Based on current information, HICL estimates the adverse impact of the Carillion factor to be 2.8p of NAV per share (1.8%).

INPP: Carillion provided FM to 3% by value of the 127 projects INPP is invested in. It currently anticipates the adverse impact to be a negligible 0.01p of NAV per share.

JLIF: Carillion provided facilities management to nine (8.5% by value) of the 63 projects HICL is invested in. It was not the contractor on any of JLIF’s current construction projects but there is one project where Carillion was the original construction contractor and held responsibility for latent defect risk. Based on current information, JLIF estimates an adverse impact on NAV of £3m, which I calculate as 0.3p a share per share (1.8%).

Storm in a teacup?

All three companies had been aware of the issues affecting the construction and FM  giant for some time and had made contingency plans in the event of liquidation, which they’re now implementing. Principally, this concerns the appointment of replacement facilities managers.

HICL faces the biggest impact on its NAV (albeit not very big at all) and I’m encouraged by two factors to think we’re looking at something of a storm in a teacup. HICL has said: “The Board is confident that this analysis does not change the dividend guidance that the Company has published for the current financial year and the two subsequent financial years.” The other encouraging thing is that last Friday two directors and two senior managers bought shares totalling about £250,000.

With all three companies’ shares trading well down from their 52-week highs and sporting generous dividend yields, I believe now could be a good time to buy.

The post The fall of Carillion has created a buying opportunity in these 3 stocks appeared first on The Twelfth Magpie.

More reading

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G A Chester has no position in any of the 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.

The company — which invests in government-backed infrastructure projects — saw net asset value improve to £1.2bn as of June 2017, up 11.5% year-on-year, figures it said were “primarily as a result of investments and the shareholder tap issue.”

Meanwhile, John Laing Infrastructure Fund’s portfolio value grew to £1.22bn from £1.18bn a year earlier. And total shareholder returns rose 6.2% during the January to June period.

In other news, the FTSE 250 company advised that it enjoyed strong cash flows from its diversified portfolio of 63 projects. But in less-cheery news, John Laing saw pre-tax profit slump to £34.7m in the half year to £72.3m in the corresponding 2016 period.

Bigger scope, bigger returns?

At its May AGM, John Laing Infrastructure Fund shareholders voted to amend certain aspects of its investment policy. The  move has eased the geographical restrictions facing the fund and could really light a fire under future returns.

The Guernsey entity still has to maintain at least 50% of total assets by value here in the UK. But the new policy, as chairman Paul Lester puts it, “affords the company greater flexibility to take advantage of attractive investment opportunities that previously it would have been precluded from pursuing and will support the company’s future growth.”

That is not to say that John Laing Infrastructure Fund’s existing revenues outlook isn’t much to shout about. Indeed, Lester noted that “the pipeline of new opportunities is promising with deals coming through the First Offer Agreements with John Laing Group plc and from industry relationships.”

Although the fund is expected to endure a 27% earnings slide in 2017, it is expected to bounce back with an 11% rise next year. And these projections make the infrastructure brilliant value for money, the stock boasting a bargain-basement forward P/E ratio of 7.7 times.

Meanwhile, those seeking chunky dividend growth also need to give it serious attention. Last year’s 6.82p per share reward is predicted to step to 9.7p in 2017 and to 10.2p in 2018, resulting in chunky yields of 3.3% and 3.5%.

Tune in

Those seeking hot earnings and dividend growth in the years ahead also need to check out ITV (LSE: ITV) right now.

Current turbulence in the global advertising market is expected to result in a rare earnings dip at the Coronation Street and Love Island producer, a 7% bottom-line reverse currently being anticipated by City brokers.

But with ad revenues expected to pick up again in the medium term, and the company’s ITV Studios division also continuing to make stunning progress, the London-based broadcaster is predicted to get moving in the right direction again in 2018 with a 2% profits improvement.

Current projections result in a forward P/E ratio of just 10.4 times. But it is in the dividend arena where ITV really stands out — projected payments of 7.8p and 9.5p per share for this year and next create monster yields of 4.8% and 5.9% respectively. I reckon the FTSE 100 star is a brilliant all-rounder for shrewd long-term investors.

The post 2 bargain stocks I’d buy today appeared first on The Twelfth Magpie.

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Royston Wild has no position in any of the shares mentioned. The Motley Fool UK has recommended ITV. 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.

Small caps are also worth a look, because many of the high yielding FTSE 100 shares are mining or oil and gas companies, which have become particularly less attractive with falling commodity prices.

Here are five high-yielding small-cap shares:

De La Rue

De La Rue (LSE: DLAR) saw its earnings fall by a quarter in its recent financial year, as it faced increased competition from other note-printers and the higher cost of paper reduced its profit margins. Although the company has cut its annual dividend to 25 pence per share, from 41.3p, its shares still yield 4.9%.

The earnings setbacks should be temporary, as the company seeks to expand its higher margin businesses, including polymer banknotes, security products and passports. De La Rue has a forward P/E of 14.3.

John Laing Infrastructure Fund

Infrastructure investment fund, John Laing Infrastructure Fund (LSE: JLIF), invests primarily in government backed infrastructure projects. The revenues it receives is typically inflation-linked, allowing the infrastructure fund to pay dividends that grow faster than inflation. As water companies now promise slower rates of dividend growth, this fund could be a more attractive alternative investment.

Its shares currently trade at an 11% premium to its net asset value (NAV), and yields 5.4%. Although the fund has had a strong track record of delivering steady dividend growth in excess of RPI inflation, NAV growth has been very limited. So don’t expect much capital appreciation.

KCOM Group

Communications company, KCOM (LSE: KCOM), announced its full year results today. Adjusted EPS rose 5% to 7.91p, following strong demand for fibre and enterprise solutions. It sees significant opportunities for cloud and collaboration services in the Enterprise market. But, KCOM’s legacy services are performing badly, causing group revenues to decline 6.1% to £348.0 million.

The company is set to raise its dividends by 10% for the sixth consecutive year, which gives it an indicative dividend yield of 5.9%. KCOM is also attractive on an earnings basis, with a forward P/E of 12.7.

Redefine International

Redefine International (LSE: RDI) is a diversified REIT with property in the UK, Europe and Australia. The REIT’s smaller development portfolio and its larger European portfolio has meant it has enjoyed smaller property valuation gains over recent years than many of its larger peers.

But, its portfolio does have a high net initial yield of 6.8%, which provides significant rental income for distribution to shareholders. Even though Redefine International is trading at a 26% premium to its NAV, its shares yield 6.0%.

Tullett Prebon

Tullett Prebon (LSE: TLPR), an interdealer broker, saw its revenues fall by 15% in 2014, as investment banking activity declined. The outlook for the sector remains gloomy, with trading volumes declining because of new regulations reducing risk appetites of commercial and investment banks. Tullet Prebon is seeking to reduce costs to improve margins, given the sector seems to be in strucutal decline.

However, there could also be some upside to earnings from acquisitions that the company intends to make from its $100 million settlement with BGC Partners. Its shares are attractively valued, with a forward P/E of 11.7 and a dividend yield of 4.3%.

The post 5 High-Yielding Small-Cap Shares: De La Rue plc, John Laing Infrastructure Fund Ld, KCOM Group plc, Redefine International plc and Tullett Prebon Plc appeared first on The Twelfth Magpie.

More reading

• The £15bn defence splurge that could send UK shares soaring in July
• Up 446% in 12 months! What’s next for the Ceres Power share price?
• How much is needed in an ISA to unlock £1,220 of passive income a year?
• Forget meal deals! Here’s how £8 a day could be worth £357,000
• Up 132% and surging, how is this FTSE 250 share STILL so cheap?

Jack Tang has no position in any shares mentioned. The Motley Fool UK has recommended KCOM Group. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.