Soon we’ll not be supporting this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

3 investment trust ideas for income

Income has been hard to come by over the last year, but things are starting to look up. Here are 3 investment trusts to consider for income.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Income is hard to come by at the moment.

Savings rates are generally at an all-time low. For example, the average easy access cash account pays just 0.06%, while the average 1 year fixed term is now just 0.24%.

If you’re sitting on cash that you’re not likely to need for five years or more, it might be worth considering investing it in the stock market. You could get yields of up to 4% or more, with the potential for long-term capital growth on top. Remember all yields are variable, not guaranteed and are not a reliable indicator of future income.

Should I save or invest?

Please remember, unlike the security offered by cash, all investments and any income from them can fall in value as well as rise so you could get back less than you put in.

Investment trusts can be a way to invest for income. Like funds, they pool investors’ money together and can give investors access to a range of different companies.

Unlike funds though, investment trusts can hold back up to 15% of the income their investments generate each year. It’s put in a pot called the ‘revenue reserve’. If dividends fall in any one year, managers can dip into the reserve to make up any shortfall. This means investment trusts can smooth out the dividends they pay.

Some trusts have used the revenue reserve to great effect, and increased the income paid out for a number of years in a row – some have grown their dividends every year for more than half a century.

Below we look at three income-paying investment trust ideas for the long-term. These investment trusts can borrow money to invest with the intention of increasing returns (known as gearing), but this could magnify losses in a falling market and increases risk. They also have the flexibility to use derivatives which, if used, adds risk.

This article isn’t personal advice. If you’re not sure if an investment or course of action is right for you, seek financial advice. Past performance is not a guide to the future.

Investing in the investment trusts mentioned in this article isn’t right for everyone. Investors should only invest if the investment’s objectives are aligned with their own and they understand the specific risks. Investors should make sure any new investment forms part of a diversified portfolio. You can find out more about a trust’s risks and charges in the key investor information and annual reports. Investors in closed-ended funds should be aware the trust can trade at a discount or premium to Net Asset Value (NAV).

A UK-focused option

City of London Investment Trust has been managed by Job Curtis since 1991. He invests in good quality, well-managed companies, which can be bought at a reasonable share price. He believes companies with sustainable and rising dividends will see their share prices grow over time too. He likes larger, more stable companies that are robust enough to weather economic storms and still aim to pay dividends.

Curtis mainly invests in UK companies, although he can invest up to 20% overseas when he finds good opportunities. Around 13% of the trust is currently invested overseas, in countries like the US, Germany, Switzerland, France and Hong Kong. The trust is also diversified across a range of sectors including financials, consumer goods and mining.

The trust’s performed well over the long term and is ahead of the broader UK stock market. £10,000 invested 10 years ago would’ve returned £13,136*, plus a further £5,614 in income. With income reinvested, the initial investment would’ve risen to £20,334. Past performance is not a guide to the future.

The trust’s increased its dividend every year since 1966, which is the longest dividend growth record of any UK investment trust. At the time of writing, the trust’s historic yield is 4.85%. Yields are variable and not guaranteed, and are not a reliable indicator of future income.

Part or all the annual charge is taken from capital rather than income generated. This could result in a higher dividend yield but can limit capital growth.

Annual percentage growth
Mar 16 -
Mar 17
Mar 17 -
Mar 18
Mar 18 -
Mar 19
Mar 19 -
Mar 20
Mar 20 -
Mar 21
City of London Investment Trust 17.3% 1.4% 6.7% -17.8% 23.4%
FTSE All-Share 22.0% 1.3% 6.4% -18.5% 26.7%

Past performance is not a guide to the future. Source: *Lipper IM, to 31/03/2021. Total return with income reinvested.

More about City of London Investment Trust including charges

City of London Investment Trust Key Investor Information

A global option

Murray International Trust invests in companies listed across the globe. Manager Bruce Stout has been at the helm since 2004 and invests in companies he thinks can grow both their earnings and dividends. He and his team prefer companies that are difficult to compete with, reinvest their profits to keep growing, are in growing industries, and have shareholder-friendly management teams with strong track records.

They’ve found the most opportunities in the Asia Pacific region. Stout thinks lots of companies there are financially strong and are becoming more dividend-focused. In contrast, they haven’t found as many ideas in the UK, so only a small amount of the trust invests here.

Part of the trust invests in bonds, mainly from Asia and higher-risk emerging markets. The team often uses them as an easily-accessible source of cash to buy shares. Stout took advantage of recent stock market volatility to do just that.

A £10,000 investment made 10 years ago would’ve returned £4,988* in income, while the investment itself would‘ve risen to £12,968. With income reinvested, the trust would’ve returned £20,141, although past performance is not a guide to the future.

There are big differences between where the trust invests in around the world and that of the wider global stock market. So there could be times when performance will be very different to the benchmark, both positively and negatively.

The trust’s successfully grown its dividend every year for the past 16 years. Its historic yield is 4.49% at the time of writing, although yields are variable and not guaranteed. Yields are also not a reliable indicator of future income.

Annual percentage growth
Mar 16 -
Mar 17
Mar 17 -
Mar 18
Mar 18 -
Mar 19
Mar 19 -
Mar 20
Mar 20 -
Mar 21
Murray International Trust 43.2% 2.6% 2.8% -23.0% 47.4%
FTSE All World 33.1% 2.9% 10.7% -6.2% 39.6%

Past performance is not a guide to the future. Source: *Lipper IM, to 31/03/2021. Total return with income reinvested.

More about Murray International Trust including charges

Murray International Trust Key Investor Information

A specialist option

The HICL Infrastructure trust aims to deliver a long-term, stable income from a portfolio of infrastructure-related businesses operating across the globe. Lots of the services provided by infrastructure companies tend to be in demand no matter what’s happening in the economy, meaning their prices can normally be increased – often in line with inflation – without affecting demand too much.

We think the trust could be a good way to add more diversification to an income-focused portfolio.

The trust’s managed by InfraRed Capital Partners, a firm with more than two decades’ experience investing in infrastructure. Harry Seekings leads the team that manages HICL, and he’s been at the company since 1988.

Around three quarters of the trust invests in the UK, with the rest spread across Europe and North America. Its investments can be broken down into three main buckets: public-private partnership projects (where companies and government combine to maintain things like roads and hospitals), regulated assets (water, electricity and gas utilities), and demand-based assets (like toll roads and student accommodation).

The trust's delivered strong performance over the long term. £10,000 invested 10 years ago would’ve returned £6,667* in income alone, while the investment itself would’ve risen to £14,297. With dividends reinvested, the total investment would have grown to £24,125. The trust’s historic yield is currently 4.85%. Remember though, yields are variable and not guaranteed, they’re also not a reliable indicator of future income.

Investors should note that this trust currently trades at a significant premium to its net asset value.

Annual percentage growth
Mar 16 -
Mar 17
Mar 17 -
Mar 18
Mar 18 -
Mar 19
Mar 19 -
Mar 20
Mar 20 -
Mar 21
HICL Infrastructure 11.0% -15.5% 20.7% 9.1% 7.1%

Past performance is not a guide to the future. Source: *Lipper IM, to 31/03/2021. Figures shown with income reinvested.

FIND OUT MORE ABOUT HICL INFRASTRUCTURE, INCLUDING CHARGES

HICL INFRASTRUCTURE KEY INVESTOR INFORMATION


What did you think of this article?

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Editor's choice – our weekly email

Sign up to receive the week's top investment stories from Hargreaves Lansdown. Including:

  • Latest comment on economies and markets
  • Expert investment research
  • Financial planning tips
Sign up

Related articles

Category: Investment Trusts

Worldwide Healthcare Trust: August update 2021

Investment Analyst Josef Licsauer shares our analysis on the manager, process, culture, cost and performance of Worldwide Healthcare Trust.

Josef Licsauer

03 Aug 2021 5 min read

Category: Investing and saving

3 steps to making your retirement income last longer

Find out about maximising your income in retirement to give you the lifestyle you want, and three steps you can take to help make it happen.

Hannah Miles

03 Aug 2021 5 min read

Category: Shares

Investing in commodity ETFs – what investors need to know

For years, commodities have offered an alternative investment opportunity to shares and bonds. But what are they and how can you invest in them? We take a closer look.

Alexander Watkins

02 Aug 2021 5 min read

Category: Investment Trusts

Monks Investment Trust: August 2021 update

Investment Analyst Henry Ince shares our analysis on the manager, process, culture, cost and performance of Monks Investment Trust.

Henry Ince

02 Aug 2021 6 min read