Investment trusts can make excellent core portfolio holdings, in my view, due to the diversification benefits they offer. Today, I’m profiling two UK investment trusts that pay regular dividends, and currently yield in excess of 3.5%. Both can be bought in the same way that you would buy a regular share through your broker.
City of London Investment Trust
The City of London Investment Trust’s (LON: CTY) (CTY.L) objective is to provide long-term capital and income growth, and the trust places a strong emphasis on rewarding shareholders with regular dividend payouts, which are paid out on a quarterly basis.
The trust currently holds 117 stocks, and the portfolio manager, Job Curtis takes a cautious approach to investing. A list of the top 10 stocks in the portfolio at the end of July is shown below.
The trust has a fantastic dividend growth history and has increased its dividend every year for over 50 years now. Growth over the last five years has averaged just under 4%, which while not a high level of growth, is greater than inflation.
The dividend payout last year was 15.9p per share, which at the current share price equates to a trailing yield of 3.7%. Ongoing charges are a low 0.42%.
I consider The City of London Investment Trust to be an excellent core portfolio holding, and I own the trust in my personal portfolio. I’ll be looking to add to my position, on market dips going forward.
Murray Income Trust
Another trust with an excellent dividend growth track record is the Murray Income Trust (LON: MUT) (MUT.L), which has increased its dividend payout for 43 years in a row now. This trust aims to achieve “a high and growing income, combined with capital growth.”
Founded in 1923, the trust held 49 stocks at the end of July, of which the top 20 are shown below. You’ll notice some international stocks in the mix, such as Roche, Nordea Bank and Microsoft – this is because the trust has the flexibility to invest overseas if the portfolio manager sees attractive international opportunities. The trust had the largest exposure to the financials, consumer goods and healthcare sectors.
The Murray Income Trust also pays its dividends on quarterly basis, and last year paid out 32.25p per share, which equates to a dividend yield of a healthy 4.1% at the current share price. Ongoing charges are currently 0.76%.
I don’t currently own this trust but may look to add it to my portfolio in the future, to enhance my diversification, and boost my dividend income stream.
Disclosure: Edward Sheldon, CFA owns shares in The City of London Investment Trust
This article is provided for general information only and is not intended to be investment advice. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.