Studies have shown that over the long term, dividends account for more than 50% of equity market returns. So, if you don’t have dividend exposure in your portfolio, you could be holding yourself back. 

With that in mind, today I’m going to outline my three top dividend funds for a Stocks and Shares ISA.

Income and growth

One of the best-rated income funds on the market at the moment is the TB Evenlode Income Fund.

Evenlode’s team is looking for stocks that can achieve both income and capital growth over the long term. They’ve carved out an impressive track record for themselves since 2014.

The fund has produced a cumulative return of 86% over the past five years compared to its benchmark, the UK All Companies Index return of 36%.

At the time of writing the fund supports an annual dividend yield of 3.1%. It charges 0.9% per annum in annual management fees and has around 10% of its assets invested outside the UK. This gives investors exposure to dividend stocks in Europe and the US, as well as here in the UK.

The top holding in the fund is Unilever, which accounts for 8.6% of assets under management.

International income

The Evenlode fund is predominantly invested in UK stocks. For a more international income stream, I’m going to recommend Artemis Global Income.

This offering has almost no exposure to UK stocks. At the end of July, just 2.7% of net assets were invested in UK equities.

The rest of the portfolio is invested around the world. US dividend stocks made up the bulk of the portfolio, accounting for around 39% of assets under management. US companies in the portfolio include General Motors and Citigroup. Chinese, French, and Israeli stocks all feature alongside these dividend stalwarts. 

Artemis’s global income offering currently supports a dividend yield of 3.3%. The annual management charge is 0.75%, which makes it cheaper than the UK focused dividend fund featured above. 

FTSE 100 dividends

My final dividend fund pick is investment trust Merchants (LSE: MRCH). Merchants’ investment universe is limited to blue-chip UK companies. At the end of August, 97% of the portfolio was invested in UK equities. The most significant holdings were GlaxoSmithKline and Royal Dutch Shell, which together accounted for just under 12% of assets under management.

Of all the three dividend funds featured in this article, Merchants supports the highest dividend yield. Shares in the trust currently offer a yield of 5.7%. In addition to this attractive level of income, the fund, which was first launched in 1889, charges an annual management fee of 0.35% the lowest of all the funds featured in this article. 

So, if you are looking for a cheap way to invest in some of the UK’s top dividend stocks, then this could be the perfect vehicle for you. It has outperformed its benchmark, the UK Equity Income Index by around 5% over the past five years.

The post 3 top dividend funds for a Stocks and Shares ISA I’d buy today appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns shares in Unilever, Royal Dutch Shell and the Merchants Trust. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. 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.

Yet many people do end up trying to live off the State Pension and struggle through retirement, simply because they’ve no retirement savings. According to recent research from Equiniti, around 25% of single pensioners are currently living off State Pension payments alone.

If the thought of trying to survive on less than £170 per week in retirement worries you, it’s a good idea to do something about it sooner rather than later. With that in mind, here’s a look at a simple strategy that could boost your retirement income by 25%.

An easy way to generate extra income

One of the easiest ways to generate a little extra income in retirement is through income-focused investments trusts. These are investment funds managed by professional portfolio managers (meaning you don’t need to worry about picking stocks yourself) and generate steady income by investing your money in large, well-known companies that are listed on the stock market.

Here in the UK, there are a number of investment trusts that pay high levels of income and have excellent long-term track records. For example, three that I believe are well suited to retirees are the City of London Investment Trust, the Murray Income Trust, and the Merchants Trust. These are all listed on the London Stock Exchange, meaning you can buy them through an online broker such as Hargreaves Lansdown.

All three have been around for a long time (the Merchants Trust was founded in 1889!) and all have excellent track records when it comes to paying their investors regular income, or ‘dividends’. All three also offer high dividend yields right now. For example, Merchants Trust currently yields 5.4%, while City of London and Murray Income yield 4.3% and 3.9%, respectively. The average yield between them is a healthy 4.5%.

Boosting your retirement income by 25%

So, how much money would you have to invest if you were looking to generate income of £2,191 per year (25% of the State Pension) in retirement?

Well, according to my calculations, if you put together a portfolio that consisted of these three investment trusts, you would need a total lump sum investment of around £48,700 to generate annual income of £2,192. Assuming these trusts were held in a Stocks & Shares ISA, the income would be tax-free.

In other words, with an investment of less than £50,000 you could potentially boost your retirement income by 25%. So you’d be looking at a total income of £10,959 per year, as opposed to just £8,767 from the State Pension alone. That could certainly make a difference to your lifestyle.

Of course, building up a lump sum of £48,700 in the first place is likely to be challenging for many. However, with a little advanced planning, it’s certainly possible. The key, as always, is to start saving as soon as possible.

The post Worried about the State Pension? This strategy could boost your retirement income 25% 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?

Edward Sheldon owns shares in City of London Investment Trust, Murray Income Trust, and Hargreaves Lansdown. The Motley Fool UK has recommended Hargreaves Lansdown. 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.

With that in mind, here’s a look at two investment trusts that I feel could be well suited to retirees. Both offer a nice mix of income, capital growth, and security.

Murray Income Trust

The first pick I want to highlight is the Murray Income Trust (LSE: MUT), which was founded all the way back in 1923. Its objective is to generate a high and growing income stream for its investors combined with a little bit of capital growth. This trust has a four-star rating from financial services group Morningstar.

I like this trust for several reasons. For starters, it’s mainly focused on blue-chip FTSE 100 dividend stocks. For example, top holdings in the portfolio currently include the likes of Diageo, Prudential, GlaxoSmithKline, and Unilever. This gives the portfolio a nice ‘defensive’ tilt.

Second, the trust is allowed to invest 20% of its capital internationally, which is a handy feature as there are many fantastic companies listed outside the UK. Currently, the trust has exposure to international companies such as Microsoft and healthcare giant Roche.

Third, not only does the trust have a high dividend yield (3.9%) but it also has a fantastic dividend growth track record having increased its dividend for 45 consecutive years now. That makes it an Association of Investment Companies (AIC) ‘dividend hero’ – the prestigious classification for trusts that have registered 20 or more consecutive dividend hikes.

With fees of just 0.69% per year, I think this could make an excellent addition to a retiree portfolio.

Merchants Trust

Another one that I believe could be well suited to retirees is the Merchants Trust (LSE: MRCH). Founded in 1889, this has a specific focus on generating high income for its investors as well as some capital growth, and it’s also an AIC dividend hero, having registered 37 years of consecutive dividend growth now.

An analysis of the MRCH portfolio reveals that it also has a strong focus on FTSE 100 dividend stocks. For example, the top three holdings at the end of May were Royal Dutch Shell, GlaxoSmithKline, and HSBC Holdings. It’s these kinds of high-yielding income stocks that have helped the trust to pay extremely generous dividends to its investors in recent years – the current yield is a fantastic 5.3%. Dividends are paid quarterly too, which is an added benefit.

With its high dividend yield and ongoing charges of just 0.59% per year, I think the Merchants Trust could be an attractive proposition for investors who are looking to supplement their income in retirement while not taking big risks with their money. 

The post 2 top dividend investment trusts that I think retirees will love appeared first on The Twelfth Magpie.

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• 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?

Edward Sheldon owns shares in the Diageo, Unilever, Prudential, Murray Income Trust, Royal Dutch Shell and GlaxoSmithKline. Teresa Kersten, an employee of LinkedIn, a Microsoft subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline, Microsoft, and Unilever. The Motley Fool UK has recommended Diageo, HSBC Holdings, and Prudential. 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 looking at two investment trusts that I believe could be ideal for investors in their 50s. Both trusts have a strong focus on FTSE 100 dividend stocks and therefore offer the potential for capital growth and income, but are also managed quite conservatively, meaning they are lower risk.

City of London Investment Trust

The City of London Investment Trust (LSE: CTY) could have a lot to offer investors in their 50s, in my opinion.

For starters, portfolio manager Job Curtis – who has managed the trust for nearly 30 years now – takes a cautious approach to investing, generally focusing on well-established, dividend-paying companies (top holdings in the portfolio at the end of 2018 included Shell, HSBC, BP, Diageo, and Unilever) and never taking unnecessary risks. This style of investing is well suited to older investors as it can offer downside protection when markets are falling. A look at recent performance shows that the trust outperformed its benchmark in the second half of 2018 when global equity markets declined.

Furthermore, the trust offers a nice yield of around 4.5% at present, meaning investors can pick up a healthy level of income from the investment, and it also has a fantastic dividend growth track record, having increased its payout every year for over 50 years now, which is an excellent achievement.

With fees of just 0.41% per year, I see CTY as an excellent core holding for investors in their 50s.

Merchants Investment Trust

Another investment trust that I believe is well suited to investors in their 50s is the Merchants Investment Trust (LSE: MRCH). This mainly invests in large, well-known FTSE 100 companies with the aim of providing investors with a high level of income, plus income growth and some long-term capital growth. Its top holdings at the end of 2018 were Shell, GlaxoSmithKline, HSBC, Imperial Brands, and BP.

What I like about MRCH is that the portfolio manager Simon Gergel is extremely focused on dividends. That makes it a good choice for older investors who aren’t far off retiring, as dividends could potentially be used for income in retirement. The trust currently offers a high yield of around 5.4%, meaning that a £10,000 investment could generate dividends of £540 per year (not guaranteed of course). And like CTY, it also has a good dividend growth track record, having increased its payout for 36 consecutive years now.

With ongoing charges of a reasonable 0.59% per year, I think Merchants Investment Trust could definitely be worth considering if you’re in your 50s and looking for lower-risk investments.

The post In your 50s? I think these low-risk investment trusts are worth a look appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in City of London Investment Trust, Royal Dutch Shell, Imperial Brands, GlaxoSmithKline, Unilever and Diageo. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline and Unilever. The Motley Fool UK has recommended Diageo, HSBC Holdings, and Imperial Brands. 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.

Happy 130th birthday!

The Merchants Trust (LSE: MRCH) celebrates its 130th birthday this year, having been launched in 1889, the year the Eiffel Tower was opened and Van Gogh painted his Starry Night. It may not be as famous, but it has also stood the test of time.

The £507m trust aims to deliver market-beating income and long-term capital growth from a portfolio of higher yielding large UK companies. It is targeted at investors who want a spread of mainstream UK stocks, judging by its top 10 holdings.

Pick and choose

These are all FTSE 100 dividend income stalwarts such as Royal Dutch Shell, GlaxoSmithKline, HSBC Holdings, Imperial Brands, BP, SSE… need I go on? Many of you will prefer to buy stocks like these directly yourself, but if you want to hand over the reins, this could be for you.

As portfolio manager Simon Gergel points out, this trust has survived two world wars, the great depression, the global financial crisis and the 1970s inflationary shock. “Somehow today’s uncertainties over Brexit and Donald Trump’s trade spat with China don’t seem so threatening,” he adds.

Historic performance

UK equities have underperformed global stock markets lately but the trust has risen 38.8% in the last three years, according to Trustnet.com, against 28.4% on its benchmark UK equity income index. However, it trails over five years, growing 22% against 26.9% for its benchmark.

Like many investment trusts, management charges are low, with a total ongoing charges figure (OCF) of just 0.59%. I usually prefer trusts trading at a slightly larger discount than Merchants, currently just -0.2%, but this is one in demand. It also has an impressive yield of 5.5%. Not many funds offer that.

So should you buy this instead of, say, a tracker such as HSBC FTSE All Share Index, which has a rock bottom OCF of just 0.06%? This fund’s three-year performance is slightly weaker at 36.9%, but it has beaten Merchants over five years growing 31.5%. The yield is currently lower, though, at 3.99%. Income seekers may decide Merchants just has the edge. These two investment trusts might also tempt you.

Think small

BMO Global Smaller Companies (LSE: BGSC) is also celebrating its 130th birthday and has grown strongly after the board switched focus to smaller companies in 1975. It is now worth more than £800m.

Now, I personally believe that trackers are the best way to tap into well-researched large-caps while active management is better suited to riskier and less researched smaller firms. So how does BMO do? Pretty well, frankly. It is up 48.8% over three years and 64.3% over five, and although it trails its benchmark IT Global index, this may reflect the strong performance of huge US technology stocks that this fund does not touch.

Size isn’t everything

This trust gives you access to smaller global stocks you would never unearth yourself, plus exposure to specialist funds such as Aberdeen Japanese Smaller Companies, spreading risk. It has global exposure but with plenty of US focus (39%) and UK (25%). Check if this balances your portfolio. Charges on smaller-cap funds are usually slightly higher but an OCF of 0.83% is respectable, as is performance.

The post Forget the cash ISA. I’d buy these 2 investment trusts instead appeared first on The Twelfth Magpie.

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• 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?

harveyj has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended HSBC Holdings and Imperial Brands. 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.

However, if you’re approaching retirement and concerned about trying to survive on the low State Pension payout, there are things you can do now, that could help you boost your income in your golden years.

Today, I’ll show you how you could potentially double your retirement income with the help of dividend-paying investment trusts.

What is an investment trust?

An investment trust is a publicly-listed company that is designed to generate profits for its shareholders by investing in a whole portfolio of other companies. Investment trusts can be bought and sold just like regular shares through a broker.

There are many advantages putting your money in investment trusts. For starters, they can be a great way to access the stock market if you don’t want to pick stocks yourself – your money is managed by a professional fund manager. Second, they also provide instant diversification, because your money is spread out over many different companies. Third, they’re generally quite cost-effective, as most have very low fees.

Furthermore, another key advantage of investments trusts is that they can be a great income-generating tool as many pay their shareholders cash dividends on a regular basis. Which brings me back to the State Pension. If you’re concerned that you won’t be able to live off that in retirement, investment trusts could be an excellent way to boost your income.

Regular cash payments

One example of an excellent dividend investment trust is the Merchants Investment Trust (LSE: MRCH). Established in 1889, this mainly invests in large, well-known FTSE 100 companies with the aim of providing investors with high income, plus income growth and some long-term capital growth. Currently, its top three holdings include GlaxoSmithKline, Royal Dutch Shell and HSBC. Impressively, the trust has increased its dividend for 35 consecutive years now. Last year, Merchants paid its shareholders 24.8p per share in cash dividends which at the current share price, equates to a yield of 5%.

So how could that kind of yield boost your retirement income? Let’s look at some examples, assuming the investment trust was held in an ISA and the dividend income was, therefore, tax-free.

Extra income

The table above shows that with an investment of just £170,924 in MRCH, you could receive dividend income of £8,546 per year, which, when combined with the State Pension, would mean your retirement income would be double that of the State Pension.

Of course, this is a simplistic example. It’s important to remember that dividend income from shares is not guaranteed. Furthermore, as with any other stock market investment, the value of the fund could also decline. In reality, it would be wise to diversify your capital among several different investment trusts to spread your risk. However, the message is clear: dividend-paying investment trusts can be a great way to boost your retirement income.

With the State Pension payout less that £165 per week, it’s no surprise that many people are worried about the future. However, if you act now, and consider ways to boost your income, there’s a good chance you can salvage your golden years and live a more comfortable retirement.

The post Want to earn DOUBLE the State Pension payout in retirement? Here’s how appeared first on The Twelfth Magpie.

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• 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?

Edward Sheldon owns shares in GlaxoSmithKline and Royal Dutch Shell. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended HSBC Holdings. 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.

Equity income funds

Fortunately, there may be a cheaper option. You can invest for dividend income not only by purchasing individual company stocks, but also through investment funds, such as unit trusts, Open-Ended Investment Companies (OEICs) and investment trusts.

These funds invest in dividend-paying companies, with the intent of delivering regular income for their investors, paid out of the dividend income which they receive from their underlying investments. When it comes to diversification, equity income funds have therefore become popular with dividend investors looking for a low cost method of spreading the risk.

That is the case with The Merchants Trust (LSE: MRCH). With a low ongoing charge of just 0.59%, it seeks to provide investors an above average level of income, as well as income growth and long-term growth of capital via investments in domestically-listed dividend stocks.

Large-cap companies

Simon Gergel, who has been managing the trust since 2006, has a preference towards large, well-established and well-known UK companies. In terms of recent portfolio activity, he added two new holdings to the portfolio — shopping centre real estate company Hammerson and wealth manager St James’s Place.

Altogether, there were 49 stock positions in the portfolio at the end of March 2018, with the largest holdings being Royal Dutch Shell (7.0%), GlaxoSmithKline (6.5%), BP (4.8%), UBM (4.3%) and HSBC Holdings (4.2%). The financial sector is its largest sector exposure, with a 31% weighting, and this is followed by industrials (16%) and consumer services (15%).

The Merchants Trust has an impressive track record for growing shareholder payouts, after having increased its dividend payouts to shareholders over the past 36 consecutive years. It currently has a yield of 4.8% and trades on a small discount to net asset value (NAV) of 3.4%.

Attractive yield

Shires Income (LSE: SHRS) is another equity income fund which offers an attractive yield. Shares in the investment trust currently offer a yield of 4.5% as they trade at a slight premium to its NAV of 1%.

But unlike the Merchants Trust, which invests primarily in equities, this fund seeks to provide shareholders with a high level of income by also investing in preference shares, convertibles and fixed income securities.

Diversification

This multi-asset approach divides the money invested between the various asset classes, adding to its diversification, which can help to reduce risk. On the downside however, the fund is also more exposed to the risk of rising interest rates, which could be a concern for investors.

Also, unlike the Merchants Trust, Shires Income also gets exposure to smaller companies via an investment in its sister small-cap equity income fund Aberdeen Smaller Companies Income, which accounts for 8.9% of its assets. Sector-wise, financials (again) dominate the Shires Income portfolio, accounting for 52% of total assets, and this is followed by consumer goods (11%) and industrials (10.4%).

Fees for the fund are a bit higher than the Merchants Trust, with an ongoing charges figure of 1.04% for the past year.

The post Investing for dividends? Consider these high-yielding equity income investment trusts appeared first on The Twelfth Magpie.

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• 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?

Jack Tang has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended HSBC Holdings and UBM. 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.

Mercantile has a solid record of achieving this goal. Over the past decade, the trust’s net asset value has grown by 205%, outperforming its benchmark by 15% over the same period. This return shows portfolio manager Martin Hudson, who’s been at the helm since 1994, knows a thing or two about picking stocks. 

And one of the primary reasons why this trust, rather than any of its peers, occupies a significant percentage of my portfolio is the fact that it only charges 0.45% per annum to manage investors’ money — that’s less than half of the UK average fund fee of 1.13%.

What’s not to like? 

Unfortunately, the one downside about the Mercantile trust is its current lack of yield. The stock supports a dividend yield of 2.3%, paid quarterly. Still, a low yield is more reflective of the company’s high allocation to small-caps, which tend to reinvest cash back into the business rather than paying it out to investors. What’s more, with capital growth averaging 17% per annum since 2009, I’m not overly concerned about the lack of yield. 

At the time of writing, shares in the Mercantile trust are trading at a 9.5% discount to net asset value. 

If it’s dividends you’re after, Merchants Trust (LSE: MRCH) could be the perfect investment for you. Merchants is focused on providing the best dividend possible for investors. Today, the trust supports a dividend yield of 5.3%, and some of its most substantial holdings include FTSE 100 income champions such as HSBC and BP. 

Dividend Hero 

Merchants has a long history of dividend investing. The company has increased its dividend yield to investors for 36 consecutive years, a record that has earned the firm ‘Dividend Hero’ status from the Association of Investment Companies. To be awarded this status, investment trusts must have a record of dividend increases for at least two decades. 

Just like Mercantile, Merchants is also low-cost compared to its sector peers. Specifically, the trust currently charges only 0.6% per annum, around the same level as other passive income-focused funds. The company trades at a 4.5% discount to net asset value. 

If you’re looking for a dividend champion to add to your ISA, Merchants certainly deserves your attention. Today the company reported, alongside its full-year results, that net asset value increased 14.5% for 2017, outperforming the FTSE 100’s return of 11.3%. Over the longer term, the trust has outperformed as well, producing a NAV return of 49.1% over five years, compared to the FTSE 100’s performance of 45.9% over the same period. The income distribution has exceeded the wider index’s by more than 1.2% over this period. 

The post 2 millionaire-making investment trusts I’d buy and hold for the next decade appeared first on The Twelfth Magpie.

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• 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?

Rupert Hargreaves owns shares in the Mercantile Inv Trust. The Motley Fool UK has recommended BP and HSBC Holdings. 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 already hold two dividend-paying investment trusts within the account. These are the City of London Investment Trust and the Murray Income Trust. Both have excellent yields and long-term dividend-growth track records.

However, I also have my eye on several others that pay big dividends. Here’s a look at two I’m keen to add to my ISA.

Henderson Far East Income

I’m quite bullish on the long-term growth prospects of China. The country has the world’s largest population at 1.4bn and is already the second-largest economy in the world. Yet my portfolio is underexposed to this economic powerhouse at present. For this reason, I’m considering a position in the Henderson Far East Income (LSE: HFEL) trust.

This trust aims to provide a high level of dividend as well as capital appreciation from a diversified portfolio of investments traded on the Pacific, Australasian, Japanese and Indian stock markets.

With a 30% weighting to China, the trust appears to be an excellent way to gain exposure to the world’s second-largest economy, as well as exposure to other fast-growing countries such as South Korea and Taiwan. The top three sector weightings within the trust are financials, oil & gas and technology and the top three holdings are currently Samsung Electronics, China Construction Bank and Agricultural Bank of China.

The dividend yield on offer from the Henderson Far East Income trust looks very attractive. For 2017, the payout was 20.8p per share, which equates to a yield of 5.7% at present. It’s also worth noting that the dividend has been increased for 10 consecutive years now, an excellent achievement. I think this trust could be an excellent addition to my ISA, given its high yield and geographical diversification benefits.

Merchants Investment Trust

Turning back to the UK, another high-yielding investment trust I’m considering is the Merchants Investment Trust (LSE: MRCH).

This trust mainly invests in large FTSE 100 companies with the aim of providing its shareholders with an ‘above-average’ level of income and income growth, as well as long-term capital growth.

Looking at the top holdings, there are plenty of familiar names within the portfolio. For example, Royal Dutch Shell is the top holding with a portfolio weighting of 7.5%, followed by GlaxoSmithKline (6.2%), BP (5.2%) and HSBC Holdings (4.9%). In other words, an investment in this trust provides exposure to some of the largest, blue-chip companies listed in the UK.

The dividend yield here is also very attractive. For 2017, investors received 24.2p per share, which at the current share price of 465p, is a yield of 5.2%. Impressively, the payout has been increased for 35 consecutive years now. With a low ongoing charge of just 0.63%, the Merchants Investment Trust appears to be an excellent choice for UK income investors.

The post Two high-yielding dividend investment trusts I’m considering for my ISA appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in City of London Investment Trust, Murray Income Trust, Royal Dutch Shell and GlaxoSmithKline. The Motley Fool UK owns shares of and has recommended GlaxoSmithKline. The Motley Fool UK has recommended BP, HSBC Holdings, 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.

Investment trusts are publicly traded companies that own a portfolio of stocks. They’re designed to generate profits for shareholders by investing in the shares of other companies. They can be bought and sold in the same way as regular shares, and are a fantastic way to add diversification to your portfolio. And many reward their shareholders with big dividends, on a regular basis.

Today, I’m looking at two investment trusts that currently have higher yields than the FTSE 100 index.

Murray Income Trust

Founded in 1923, the Murray Income Trust’s (LSE: MUT) objective is to achieve a high and growing income, combined with capital growth. It’s run by Aberdeen Asset Management and invests mainly in UK equities, although it does have the flexibility to invest internationally.

At the end of October, the trust’s five largest holdings were Unilever (4.6%), British American Tobacco (4.1%), AstraZeneca (4%), Prudential (3.8%) and GlaxoSmithKline (3.7%). BP (3.5%), HSBC (3.4%) and Royal Dutch Shell (3.3%) also made the top 10. As you can see, that’s a strong focus on blue-chip FTSE 100 names, with those eight companies making up almost a third of the portfolio.

Key international stocks in the top 20 holdings included Swiss pharmaceutical giant Roche, Nordic financial services group Nordea, and Microsoft.

The trust has a fantastic growth track record, having increased its dividend for 43 consecutive years now. For 2017, investors will receive 32.75p per share, which is a yield of 4.3% at the current share price, higher than the FTSE 100’s trailing yield of 2.9%. Dividends are paid on a quarterly basis, which is great news for income investors seeking regular cash returns. 

With an ongoing charge of just 0.76%, this trust looks to be a good way to gain exposure to some of the FTSE 100’s largest companies, and pick up an attractive dividend yield in the process.

Merchants Trust

Another excellent trust for dividend investors is the Merchants Trust (LSE: MRCH). Founded in 1889 and managed by Allianz Global Investors, the trust aims to provide above-average income, as well as income growth and long-term capital growth, by mainly investing in higher-yielding FTSE 100 stocks.

An analysis of the trust’s top 10 holdings, also reveals a list of blue-chip names. Royal Dutch Shell was the top holding at 8.2% of the portfolio at the end of October, followed by GlaxoSmithKline (5.9%), BP (5.8%), HSBC (4.7%) and Lloyds Banking Group (3.4%). Other key holdings included BHP Billiton (3.3%), Prudential (2.9%), and Legal & General Group (2.8%).

Looking at those names, it’s clear to see that the Merchants Trust favours big dividend payers. Indeed, portfolio Manager Simon Gergel has said: “Income is our focus. We are income seekers and we make no apology for buying shares that provide the high yield we require. It’s why so many private investors hold the trust.”

Like the Murray Income Trust, Merchants has an excellent dividend growth history, having increased its payout for 35 consecutive years now. Investors received 24.2p per share for 2017, which is a yield of a high 5.1% at present. With ongoing charges of just 0.63%, this trust is a great option for income investors, in my opinion.

The post 2 dividend investment trusts with higher yields than the FTSE 100 appeared first on The Twelfth Magpie.

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Edward Sheldon owns shares in Royal Dutch Shell, GlaxoSmithKline, Lloyds Banking Group and Legal & General Group. 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 GlaxoSmithKline and Unilever. The Motley Fool UK has recommended AstraZeneca, BP, HSBC Holdings, Lloyds Banking Group, 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.