Investment trusts

For those on the hunt for reliable income, it may be worth considering investment trusts as a way to get exposure to the stock market. An advantage that investment trusts hold over open-ended funds, such as unit trusts, is their ability to hold back some of the dividend income they earn each year. This enables them to draw down on their reserves to smooth out income payments during more difficult periods.

The Foreign & Colonial Investment Trust (LSE: FRCL) is one such investment trust which has paid a dividend every year since its inception 150 years ago. What’s more, it has also been growing its dividend for 47 consecutive years.

Broad exposure to global markets

The F&C fund is well-balanced and geographically diversified with broad exposure in international markets and across various industries. This one-stop shop approach makes it a potentially attractive core holding for a starter portfolio, or for those investors seeking to increase their portfolio diversification.

With Brexit uncertainty continuing to overhang on UK economic growth, the fund has continued to cut its exposure to domestic stocks. Its portfolio of UK stocks account for less than 5% of its total assets, down from the 29% in 2013.

North America is its biggest geographical exposure, with 34% invested there. This is followed by Europe (excluding theUK) at 13%, emerging markets (11%) and Japan (9%). It has a further 23% invested in its multi-manager Global Strategies portfolio and 6% in private equity funds.

Shares in the investment trust have a current dividend yield of 1.5%.

Direct property and equity

Meanwhile, the Value and Income Trust (LSE: VIN) has a more unique offering, investing both in UK equities and direct property. By combining investments in these two areas, the fund aims for long-term real growth in dividends and capital value without taking on too much undue risks.

Property investments account for a growing proportion of its assets and currently represents a little more than a third of its portfolio value. The trust focuses on higher yielding, less fashionable areas of the UK commercial property market.

It has a preference towards assets with long, stable income streams, particularly those benefiting index-linked rent reviews. Such index-linked leases account for 62% of the portfolio’s rental income, affording it substantial protection against inflation. And to further underscore its risk-averse culture, the property portfolio has a long average unexpired lease length of 14 years, with investments being funded for many years by long-term fixed rate loans.

High yield

In the equity space, it’s invested in a diversified portfolio of primarily high-yield stocks, which includes many medium- and smaller-sized companies. Its largest equity holdings include Beazley, Unilever, Halma, BP and Legal & General.

Trading at an 18% discount to its net asset value (NAV), shares in the Value and Income Trust are attractively priced. Dividends per share for the trust grew by 3.6% to 11.4p this year — marking its 31^st consecutive year of dividend growth, and giving shares in the trust a yield of 4.2%. 

The post 2 top dividend hero investment trusts for an uncertain market appeared first on The Twelfth Magpie.

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Jack Tang has no position in any of the shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Halma. 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 good news is that some of them have been around for 100 years or more, so they have a lengthy record for investors to consider before buying. 

One that has recently popped up on my radar is the Value and Income Trust (LSE: VIN), which has a unique investment approach. 

A unique approach

Unlike other funds, Value and Income invests in both shares and property directly and has been successful with this strategy for over 30 years. 

Set up in 1986, over the past 31 years the investment trust has grown its net asset value from 44p per share at inception, to 356p today, a compound annual growth rate of 7.2%. Including dividends the trust has returned 7.6% per anum over this period, smashing the FTSE All Share’s return of 4.7% per annum. 

These steady, market-beating returns show that Value and Income’s strategy works but today, shares in the trust are on special offer. At the end of September, the net asset value was reported at 356p per share, so at current levels, the shares are trading at a discount to NAV of 23%. 

As well as the discounted valuation, the shares support a dividend yield of 4.1%. So, if you’re looking for an undervalued investment trust with a proven record of creating value for investors, this one ticks all the boxes. 

An investment in the future

Value and Income is a defensive trust with an impressive record but if you’re looking for something with a bit more risk, and a bet on future technologies, Polar Capital Technology Trust (LSE: PCT) might be for you. 

Over the past five years, shares in Polar Capital have gained a little over 200% as it has benefitted from the global tech boom. And today, the company announced yet another strong portfolio performance for the six months to the end of October. In the period, it reported a 19% rise in its NAV per share, outperforming its benchmark, the Dow Jones World Technology Index by 2%. 

According to management, gains came from companies benefitting from growth in payments (PayPal Holdings Inc), robotics (Cognex Corp) and iPhone content (Universal Display Corp). 

Unfortunately, while Polar Capital is a great way to play future trends, high demand means that it trades at a slight premium of 0.5% to NAV. No dividend is offered, but with such a strong capital performance over the past five years, arguably income is not necessary. 

Since the beginning of 2014, it has produced a total capital return of 731% for investors. Over the same period, the FTSE 100 has returned only 70% — it’s hard to ignore this scale of outperformance. 

If you’re looking to invest in the technology of the future, with a fund that has a proven record of beating the market, Polar Capital might be the company for you. 

The post 2 cheap growth investment trusts I’d buy and hold for 25 years appeared first on The Twelfth Magpie.

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Rupert Hargreaves owns no share mentioned. The Motley Fool UK owns shares of and has recommended PayPal Holdings. 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.