Renewable energy

First up is The Renewables Infrastructure Group (LSE: TRIG), which invests in renewable energy assets in the UK and Northern Europe, including wind farms and large-scale solar power projects.

Investors are on the hunt for alternative sources of reliable income as the stock market is trading near record highs and yields on bonds remain pitifully low. With physically-backed assets and the guaranteed nature of government subsidies for renewable energy generation, investing in renewable energy projects should deliver stable, long-term returns.

Another benefit of investing in renewables is diversification. As returns from investing in such assets have historically had little correlation with traditional investments, such as stocks and bonds, the inclusion of renewable investments could give investors greater downside protection in a market sell-off.

There’s some inflation protection too, as revenues benefit from inflation linkage via Feed-in tariff and CfD subsidies, which are pegged to RPI inflation, and exposure to energy prices.

6% yield

The Renewables Infrastructure Group has been an impressive cash cow for income investors since its IPO in 2013. Those who have invested from the beginning have earned a total return — that is both the capital growth and dividend income, of 8% annualised.

At a current share price of 106.2p, the fund offers investors a current dividend yield of 6% from a quarterly dividend payout of 1.6p per share. And in line with peer renewable energy investment trusts, shares in the fund trade at a slight premium to its net asset value (NAV) of 6%.

Infrastructure

Another safe high-yielding investment trust worth a closer look is GCP Infrastructure Investments (LSE: GCP).

Infrastructure has been one of the most popular defensive asset classes in recent years, attracting billions in fund flows from sovereign wealth funds, pension companies and other institutions. With stable cash flows underpinning infrastructure assets, funds with holdings in infrastructure investments tend to earn steady and predictable income.

GCP Infrastructure Investments is somewhat different to other infrastructure investment trusts, in that it doesn’t invest in equity interests of infrastructure projects, but instead in the debt issued by infrastructure projects.

Less risky

As a buyer of debt, particularly Private Finance Initiative debt, as opposed to equity investments, the investment trust is expected to be less risky than its peers. There’s substantially less operational risk involved, since equity holders, being the residual claimants of a company’s assets, usually take the first hit from any impact on profits.

Moreover, the fund has some hedge against inflation too as a big proportion of its assets is inflation-linked.

On the downside, valuations are a bit more expensive relative to sector peers, with shares trading at a 14% premium to its NAV. But in spite of its bigger valuation premium, the shares still offer investors a similar yield of 6%.

The post Looking for reliable high yields? Consider these dividend investment trusts 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.

Today I’m going to look at two FTSE 250 companies whose businesses have a long-term focus built on real assets. Do they have what it takes to deserve a retirement buy rating?

A long-term Brexit winner

One of the market sectors that’s been most heavily affected by Brexit uncertainty is London commercial property. The directors of London-focused group Great Portland Estates (LSE: GPOR) have taken a conservative approach to these risks, selling developments worth £727m and scaling back near-term plans for other new projects.

The impact of these decisions — according to the firm’s 2016/17 results — is that the group’s net asset value fell by 5.7% to 799p per share last year. Net debt has been reduced so that the group’s loan-to-value ratio is just 12.2% — extremely low for a company of this kind.

Notwithstanding these changes, lettings on newly-completed developments meant that Great Portland’s rent roll rose by 13.2% to £109.6m despite these disposals. New lettings this year were at rates 0.6% above those reported in March 2016.

However, the company warns that that rising rental yields “tend to occur ahead of falls in rental values towards the end of a property cycle”. In other words, Great Portland expects rental rates to weaken, possibly alongside further falls in property value.

At about 660p, the shares currently trade at a 17% discount to net asset value. That’s a reasonable entry point, but I think the company’s comments suggest that both net asset value and the firm’s share price could have further to fall.

Great Portland’s ordinary dividend rose by 9.8% to 10.1p last year. That’s equivalent to a yield of 1.5%, which isn’t outstanding. However, the firm’s low-risk balance sheet and conservative management suggest to me that this is an income stock you could buy and hold forever. I’d hold now and buy more if the shares continue to fall.

You may prefer this 5.9% yield

If you’re looking for an asset-backed income stock but need a higher dividend yield, then you may be interested in my next stock.

Renewables Infrastructure Group Ltd (LSE: TRIG) invests in renewable energy assets such as wind farms. The group has a relatively short history, as it only floated on the stock market in 2013.

However, progress so far has been encouraging. The value of the group’s net assets rose by £107.7m to £834.3m last year, outpacing the £92m of new shares issued during the same period. These funds were used to help fund recent acquisitions, such as the Garreg Lwyd Hill Wind Farm in Powys, Wales.

Using stock to raise cash in this way helps to keep borrowing levels down, but it does mean that shareholders run the risk of dilution. What’s happened since 2013 is that rather than rising, the group’s net asset value per share has remained broadly stable at about 100p.

At 111p, the stock trades at an 11% premium to its net asset value. But the 5.9% forecast yield is attractive and looks sustainable to me. This could be one to consider for a pure income portfolio.

The post 2 FTSE 250 dividend stocks I’d buy for an early retirement appeared first on The Twelfth Magpie.

More reading

• 10% dividend yields! 3 dirt cheap stocks to consider in June?
• A dividend share yielding 10.2%! Should I buy before it’s too late?
• Here’s a dirt cheap FTSE 250 stock with a 10.3% dividend yield!

Roland Head 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.