Need extra income to supplement your State Pension? Consider these dividend investment trusts
The State Pension, at just £164.35 a week (if you qualify for the full payment, that is), is not a great deal of money. As such, many people look to supplement these payouts with income from other investments.
Investment trusts, which are companies that trade like regular shares but also own a whole portfolio of stocks themselves, can be a great way of doing this, as many trusts pay shareholders healthy dividends on a regular basis.
Today, I’m profiling two dividend-paying investment trusts that could be worth considering if you’re looking for a little extra income in retirement. Both have excellent dividend track records.
Edinburgh Investment Trust
Launched in 1889, the Edinburgh Investment Trust(LSE: EDIN) invests primarily in UK stocks. Its objectives are to grow its Net Asset Value per share faster than the growth of the FTSE All-Share Index, while also growing its dividends at a rate higher than UK inflation. In other words, it aims to provide investors with capital growth and rising dividends. Previously run by star portfolio manager Neil Woodford, the trust is currently managed by his successor at Invesco, Mark Barnett.
Looking at the trust’s portfolio, it’s clear that there’s a strong focus on large-cap stocks. For example, the top 10 holdings currently include a number of major FTSE 100 companies such as British American Tobacco, BP, Legal & General Group and BAE Systems. It’s also worth noting that the portfolio manager appears to employ a value approach to investing and picks stocks that trade at lower valuations and offer generous dividend yields.
Speaking of dividends, the trust is paying investors 26.6p per share this year (paid quarterly) which, at the current share price of 660p, translates to a yield of 4%. Fees are low at just 0.55% per year.
Given that this trust currently trades at a near-10% discount to its assets, I think it could be a great play for those looking for income in retirement.
Murray Income Trust
Another trust that has been around for a long time (launched in 1923) and also aims to provide both capital growth and rising income, is the Murray Income Trust(LSE: MUT). This year, its payout to shareholders is 33.25p per share, which equates to a yield of 4.4% at the current share price of 750p.
Like Edinburgh Investment Trust, this also has a large-cap dividend stock focus, which makes it an ideal holding for lower-risk investors seeking income in retirement. Top holdings currently include Unilever, British American Tobacco, Prudential and Royal Dutch Shell. The fund also has the flexibility to invest 20% of its capital internationally, and currently holds names such as Microsoft, Roche and Nordea within its top 20 holdings.
This trust currently trades on a large discount of 9.6% to its Net Asset Value, as its performance over a five-year time horizon has been a little disappointing, and investors have dumped it. However, given the large number of high-quality stocks within the portfolio, and the high dividend yield on offer, I think that discount offers considerable value. Ongoing charges are 0.69% per year.
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Edward Sheldon owns shares Unilever, Royal Dutch Shell, BAE Systems, Prudential, Legal & General Group and the Murray Income Trust. Teresa Kersten is an employee of LinkedIn and is a member of The Motley Fool's board of directors. LinkedIn is owned by Microsoft. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended Prudential. 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.
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