Why I rate these champion investment trusts as top defensive investments today

I’ve always considered investment trusts to be among the very best long-term defensive investments. There’s a couple of key reasons. One is that, unlike handing over money to typical fund managers, there’s no conflict of interest. Fund managers are answerable to their bosses, to the companies they work for. They’re […]

I’ve always considered investment trusts to be among the very best long-term defensive investments. There’s a couple of key reasons.

One is that, unlike handing over money to typical fund managers, there’s no conflict of interest. Fund managers are answerable to their bosses, to the companies they work for. They’re there to maximise the size of the slice taken by the company’s owners. But when they’re working for investment trusts, that’s you, me, the people who stump up the cash. When we invest by buying shares in an investment trust, we become the owners.

The other key thing I like about investment trusts is the way they’re allowed to handle dividends. Cash on the books can be accumulated during good spells and is handed out as extra during tougher years. And experience shows that the top trusts manage their cash flow and their dividends in a conservative and sustainable way.

That helps provide a steady income for investors, which many individual companies fail to do. I despair when I see the number of top UK firms paying out dividends they can’t afford, while shouldering increasing debt, looking only to make the next quarter look good. That’s not sustainable, it’s reckless, and it ultimately fails.

53-year investment trusts

The Association of Investment Companies keeps a list of dividend heroes that have increased their dividends for the longest periods. The 2020 list shows City of London Investment Trust, Bankers Investment Trust, and Alliance Trust at the top. Those three have lifted their dividends for an astonishing 53 years in a row.

In the year those magnificent dividend runs started, Sir Alf Ramsey was knighted for the 1966 World Cup victory, the first North Sea gas was pumped ashore, and Trumpton was first shown on British TV.

Best dividend?

Of those three investment trusts, City of London is down 26% in 2020, below the FTSE 100. But it has just declared a 2020 dividend of 19p per share, up 2.2% on last year. That’s a yield of 5.8%. With the trust’s biggest investments being top dividend-paying companies, and with plenty of cash reserves, I doubt there’s a better income investment out there today.

The other two investment trusts don’t offer the same yields, but their share prices have been holding up well. Shares in Alliance Trust have lost just 4.6% so far this year (while the FTSE 100 is down 18%). And the Bankers share price is actually in positive territory – up only 1%, but that’s a rare feat in 2020.

Half a century

Caledonia Investments has raised its dividend for 52 years in a row (every year since the Ford Escort was introduced). And a whole bunch of investment trusts have increased their dividends every year for 40 years and more.

So, are you looking for safe investments to see you through all the coming crises that will send stock markets crashing through the rest of your working life? I reckon investments trusts like these can form the bedrock of a very dependable portfolio. Then you can just sit back and remember that shares have beaten all other forms of investment for more than a century, through crises far worse than Covid-19.

5 Stocks For Trying To Build Wealth After 50

Markets around the world are reeling from the coronavirus pandemic…

And with so many great companies trading at what look to be ‘discount-bin’ prices, now could be the time for savvy investors to snap up some potential bargains.

But whether you’re a newbie investor or a seasoned pro, deciding which stocks to add to your shopping list can be daunting prospect during such unprecedented times.

Fortunately, The Motley Fool is here to help: our UK Chief Investment Officer and his analyst team have short-listed five companies that they believe STILL boast significant long-term growth prospects despite the global lock-down…

You see, here at The Motley Fool we don’t believe “over-trading” is the right path to financial freedom in retirement; instead, we advocate buying and holding (for AT LEAST three to five years) 15 or more quality companies, with shareholder-focused management teams at the helm.

That’s why we’re sharing the names of all five of these companies in a special investing report that you can download today for FREE. If you’re 50 or over, we believe these stocks could be a great fit for any well-diversified portfolio, and that you can consider building a position in all five right away.

Click here to claim your free copy of this special investing report now!

More reading

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. 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 post Why I rate these champion investment trusts as top defensive investments today appeared first on The Motley Fool UK.

ASNF

Next Post

Tips for Passing the Lightning Web Components Specialist Superbadge – Challenge 5

Mon Aug 17 , 2020
Tips for Passing the Lightning Web Components Specialist Superbadge – Challenge 5 This post describes about the Lightning Web Components Specialist Superbadge Challenge 5 Guide (Tips and Guidelines). Lightning Web Components Specialist Superbadge Challenge 5: Build the component boatTile To Pass the Lightning Web Components Specialist Superbadge Challenge 5, require to […]