Two ‘defensive’ dividend investment trusts I’d buy for 2019

Conflict between USA and China, male fists - governments conflict concept
Conflict between USA and China, male fists - governments conflict concept

Investment trusts can be a great way to get exposure to the stock market, no matter whether you’re an experienced investor, or a total beginner. They’re easy to buy and sell as they trade just like regular stocks, they’re cost-efficient, and they can also offer excellent diversification benefits, as most invest in a broad range of companies.

Today, I’m looking at two of my favourite dividend-paying investment trusts. Both have a ‘defensive’ focus, meaning they should offer resilience in the current market environment.

City of London Investment Trust

For a ‘core’ investment trust holding, it’s hard to look past the City of London Investment Trust(LSE: CTY), in my view. The trust has been around since 1891, meaning that it has weathered all kinds of market conditions, and it has increased its dividend for over 50 consecutive years, which is an excellent achievement. It’s also been managed by the same portfolio manager, Job Curtis, for around 27 years now, meaning that it offers a degree of stability and a consistent investment style.

Curtis manages the trust with a conservative approach to the stock market, generally focusing on well-established, dividend-paying companies that have global operations, remaining diversified, and never taking unnecessary risks. In my opinion, this approach is ideal for current market conditions as economic uncertainty is elevated right now. The top five holdings at the end of November were Shell, HSBC, BP, Diageo, and Unilever – all companies which have been around for a long time and have good dividend track records.

Another advantage of this particular trust is its high yield, as for the current financial year, it is paying investors four quarterly dividend payments of 4.55p per share, which at the current share price equates to a yield of 4.8%. With an ongoing charge of just 0.41%, I see CTY as an excellent UK equity core holding.

Murray Income Trust

Another investment trust that has been around for a long time (since 1923) is the Murray Income Trust(LSE: MUT). Like CTY, this one has a strong focus on dividend-paying companies, and it aims to provide investors with a high and growing income stream, along with capital growth as well. It’s predominantly focused on UK equities, but it also has a little bit of exposure to stocks in Europe and the US too.

Looking at the trust’s portfolio, the top five largest holdings at the end of November were Unilever, AstraZeneca, Diageo, BP, and Shell – similar to CTY and all solid picks for current market conditions. With over a quarter of the portfolio invested across the consumer defensive and healthcare sectors, the trust should be able to offer a degree of resilience if the stock market continues to fall.

Last year, MUT paid investors a total of 33.25p per share in dividends, split over four quarterly payments, which translates to a trailing yield of 4.6% at the current share price. That’s a decent yield in today’s low-interest-rate environment and significantly higher than the yield from the FTSE 100. With an ongoing charge of 0.72%, I think this trust is a decent pick for 2019, especially as it currently trades at a 5% discount to its net asset value.

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Edward Sheldon owns shares in City of London Investment Trust, Murray Income Trust, Unilever, Diageo and Royal Dutch Shell. The Motley Fool UK owns shares of and has recommended Unilever. The Motley Fool UK has recommended AstraZeneca, Diageo, and HSBC Holdings. 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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