If you don’t want to pick your own shares, a pooled vehicle like an index tracker is an oft-recommended alternative – they’re easy to manage and so they can impose low charges.
Other investment funds, like unit trusts where we hand over our cash to be managed for us, often have to satisfy their owners foremost, so there’s an inevitable conflict with customers’ interest there.
But investment trusts are different in that, when you invest, you don’t hand over cash to the company, you buy shares in the company itself – so you are one of the owners.
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There’s an additional advantage in that investment trusts are allowed to smooth their dividend payments over multiple years, which can be great for those seeking regular income.
Global blue chips
The Manchester & London Investment Trust (LSE: MNL) has had a few erratic years, and its dividends have actually been fluctuating.
But the trust is aimed at “achieving capital appreciation, together with a reasonable level of income“, and the share price has been storming ahead. At 393p, it’s overtaken the FTSE 100 very nicely in the past three years, with 2017 being exceptionally strong so far.
Its investments are targeted mainly at blue-chip shares in developed markets which are growth orientated, and it holds a portfolio of only 20 to 40 securities. That, together with recent global economic conditions, seems likely to make it more volatile than others. But at the same time, I prefer a focused portfolio as the best way to long-term growth.
The year to July 2017 saw a total return per share of 92.4p, sharply up 48% from last year’s 62.5p. On top of that, net asset value (NAV) per share rose by 25% to 429p.
Revenue return per share did drop by 41% to 7.9p and the total dividend fell 33% to 9p. But it’s a relatively small proportion of overall returns, and it still provided a yield of 2.3%.
For a trust focussing on growth rather than maximum income, that looks like a very good performance to me, and the shares are now trading on a discount to NAV of 8.4%.
Closer to home
Big Yellow Group (LSE: BYG) is a real-estate investment trust (REIT) which invests in storage facilities in the UK, and has been raking in the cash for years.
It definitely looks better suited to those seeking regular and rising dividend income, with the annual payment having climbed from 11p per share for the year ended March 2013 to 27.6p by 2017. That’s a 2.5-fold increase in just four years, and well ahead of inflation. And forecasts for the next two year suggest a further 19% hike by March 2019.
On top of that, the share price has also been storming ahead of the FTSE 100, and at 803p as I write, it’s put on 140% over the past five years.
The firm’s first-quarter trading update in July showed modest but steady progress, with occupancy rates growing to 82% (from 78% at the same stage a year previously). Big Yellow’s target rate of 85% looks to be in reach, and that would be impressive.
Finding new sites seems to be the company’s biggest problem at the moment, but that doesn’t seem to me to be such a bad one – it certainly boosts confidence in demand for its services.
Full-year results will be with us on 1 November, and will be worth looking out for.
