Smaller companies

One such fund is the BlackRock Smaller Companies Trust (LSE: BRSC), which currently trades at a 12% discount to its net asset value of 1,534p per share. UK smaller companies have fallen out of favour with investors for quite some time, with many investment trusts covering the sector trading at some of the widest discounts to their net asset values (NAV) in the industry.

But despite uncertainty surrounding the UK economy, not least because of Brexit, the performances of smaller company investment trusts have held up well in recent years. The BlackRock Smaller Companies Trust is a particularly strong performer, with a five-year NAV return of 140%, compared to its Numis Smaller Companies plus AIM (ex Investment Companies) return of just 68% over the same period.

Growth and income

The fund aims to achieve long-term capital growth for shareholders, but it also provides income to shareholders via its twice-yearly dividend, which currently gives shares in the trust a yield of 1.8%.

Fund manager Mike Prentis, who has been the lead manager of the investment trust since 2002, doesn’t think like your average stock picker. Prentis has a preference for the fastest growing, innovative companies and takes a long-term view on fundamentals. He also uses a highly diversified investment strategy, with no single holding accounting for more than 2.5% of the portfolio value.

Industrials dominate its portfolio, with a 33% sector weighting, and this is followed by financial services (15.8%) and consumer services (13.1%). Top holdings include Dechra Pharmaceuticals (2.1%), Avon Rubber (1.8%), 4imprint Group (1.7%), Robert Walters (1.6%) and Central Asia Metals (1.6%).

Asia

Another fund that’s worth a closer look is Symphony International Holdings (LSE: SIHL). The Asia-focused investment company offers exposure to the region’s rapidly expanding markets by investing in firms that are set to benefit from the rising disposable incomes of the region’s growing middle class.

Macroeconomic fundamentals are supportive and valuations are attractive, with Asian stocks expected to benefit from strong economic growth and structural reforms in various countries. Many analysts also reckon Asian equities are only still mid-cycle in their bull market, meaning there’s potential for outperformance against developed market equities this year.

What’s more, shares in the investment company are trading at a massive 26% discount to its NAV, giving investors the opportunity to pick up its shares for significantly less than the sum of its parts.

Unquoted companies

The company is invested in a number of high-growth sectors, which include healthcare, hospitality, lifestyle and real estate. And in addition to owning listed equity investments, 33% of the portfolio is invested in unquoted companies. This gives investors exposure to companies that are in the developing stage or have under-tapped potential.

It’s not an investment suited for everyone, but for investors looking for an undervalued play on Asia, Symphony International Holdings could be a great pick.

The post 2 cheap investment trusts I’d consider in February 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.

Takeover battle raging 

Revolution is currently in the middle of a takeover battle between Stonegate Pub Company Limited, which is offering 203p per share in cash for the firm, and the Deltic Group Limited, which is proposing an all-share merger. 

Today Deltic revealed its latest offer for Revolution. The proposal provides for a combination under which existing Revolution shareholders would own 65% of the group, and Deltic owners would hold 35% of the enlarged group. According to the buyer, the combined group should benefit from approximately £6.8m of currently identified pre-tax cost synergies and approximately £0.9m of pre-tax financing synergies. What’s more, the group is “expected to be highly cash generative and financed conservatively, ” and there is to be “no change to Revolution’s existing dividend policy.“

Unlike the Stonegate offer, which provides a quick cash exit for investors, the Deltic merger could create more value over the long term. Certainly, for income investors, this might be the better option as it would allow shareholders to benefit from the merger synergies and the growth of the enlarged group. 

At the time of writing, shares in Revolution are trading at a forward P/E of 14.5. If shareholders vote to merge with Deltic, this valuation could quickly become out of date as synergies push up earnings and cash distributions to investors. 

That said, if the company chooses the Stonegate route, investors buying today could find themselves out of pocket as the offer is 3p below the current share price. 

Emerging market cash cow 

If Revolution is not for you, Symphony International Holdings (LSE: SIHL) might be a better buy. Symphony is essentially a private equity investor. The firm is a leading investor in consumer-related businesses, primarily in the healthcare, hospitality and lifestyle sectors in the Asia-Pacific region. This unique strategy has produced some exciting results for investors over the past five years. 

Last year the company paid out $40m to investors via way of a dividend, equal to around 5.7% of its net asset value. This year, distributions are on track to be even more significant. At the end of last month, Symphony declared a $60.3m distribution equal to $0.10 per share, taking the total dividend paid in 2017 to approximately $82.3m or $0.14 per share for a yield of 17% (Symphony’s shares trade in London but are quoted in US dollars). 

And as well as the company’s high double-digit dividend yield, the shares also trade at a discount of approximately 33% to net asset value of $1.20 per share.

So overall, Symphony is cheap, and the company is returning vast amounts of cash to investors. However, I should point out that as the shares are traded in dollars, investors are exposed to foreign exchange risks, and for this reason, the discount to NAV may never close. Still, for risk-tolerant investors, this looks to be an exciting dirt-cheap dividend king. 

The post Time to get greedy with with these 2 dirt-cheap dividend kings? appeared first on The Twelfth Magpie.

More reading

• 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
• With a 7% yield, is this dividend share a no-brainer?
• The CMC Markets share price is smashing the FTSE 100 in 2026. Is there an opportunity here?
• With a yield of 6.8% and a P/E ratio of 12.1, is this a dirt cheap FTSE 250 stock to consider?

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.