In your 60s? These defensive dividend investment trusts offer 4%+ yields

These defensive dividend investment trusts may be worth a closer look for retirement investors.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

When you’re considering retirement, arranging a secure and decent income for the rest of your life can be a real challenge. Unsurprisingly, with interest rates still near record lows, yields from bonds, particularly gilts, have been far from inspiring.

Equities have made up an increasing share of a retirement investors’ portfolio. But so have alternative asset classes, such as property, credit and infrastructure investments. Some of these offer attractive return and risk profiles, which is why I’m looking at two of such investments as potential sources of retirement income.

Infrastructure

First up is International Public Partnerships (LSE: INPP), which invest in long-duration public infrastructure projects. The investment trust has over 120 holdings across a variety of sectors, offering investors diversified exposure to the sector and limiting the impact of operational risks.

Should you invest £1,000 in JD Sports right now?

When investing expert Mark Rogers has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for nearly a decade has provided thousands of paying members with top stock recommendations from the UK and US markets. And right now, Mark thinks there are 6 standout stocks that investors should consider buying. Want to see if JD Sports made the list?

See the 6 stocks

Infrastructure investments make attractive defensive income investments because they earn stable, long-term cash flows. These are derived from essential physical assets, such as health and education facilities, public transportation, water and waste projects, energy and urban infrastructure.

The income they earn also has a very limited correlation with traditional investments, such as stocks and bonds. This means the inclusion of such investments could offer investors greater downside protection against a broader market sell-off.

Strong track record

International Public Partnerships, in particular, has a strong track record of growing both its capital value and shareholder distributions. Since 2007, it has delivered average annual dividend growth of roughly 2.5%, giving it a forecast payout of 7.00p in 2018.

Total returns have been even more impressive, with total shareholder returns of 165% since its IPO in 2006. This exceeded the performance of the FTSE All-share Index by 68% percentage points, and represented growth of 9.2% on an annualised basis.

Shares in the investment trust currently trade at a 1% discount to its net asset value, and offer a prospective dividend yield of 4.9%.

Student property

Student property is another interesting asset class and, in this space, I’m taking a closer look at GCP Student Living (LSE: DIGS).

Unlike a lot of companies operating in the purpose-built student accommodation market, this investment company primarily invests in and around London. It focuses specifically on assets located in the capital because the investment managers believe investments there will particularly benefit from supply and demand imbalances. High land costs, combined with heavy competition for land, means supply in London will likely be far outstripped by demand growth, driven by rising student numbers.

This geographical focus does have its downsides as well, given falling property values in the capital and its greater reliance on international students. This puts it at a greater risk of tighter immigration rules that could reduce the number of student visa applications.

Nevertheless, the student accommodation sector is still an attractive asset class for defensive income investors, given the non-cyclical nature of demand for higher education and the chronic shortage of purpose-built student properties, which command a rental premium to residential properties. Yields from the sector are also higher, with GCP Student Living earning an average net initial yield of 5%.

Shares in the investment company currently trade at a 3% discount to its net asset value, and offer a prospective dividend yield of 4.1%.

5 Shares for the Future of Energy

Investors who don’t own energy shares need to see this now.

Because Mark Rogers — The Motley Fool UK’s Director of Investing — sees 2 key reasons why energy is set to soar.

While sanctions slam Russian supplies, nations are also racing to achieve net zero emissions, he says. Mark believes 5 companies in particular are poised for spectacular profits.

Open this new report5 Shares for the Future of Energy — and discover:

  • Britain’s Energy Fort Knox, now controlling 30% of UK energy storage
  • How to potentially get paid by the weather
  • Electric Vehicles’ secret backdoor opportunity
  • One dead simple stock for the new nuclear boom

Click the button below to find out how you can get your hands on the full report now, and as a thank you for your interest, we’ll send you one of the five picks — absolutely free!

Grab your FREE Energy recommendation now

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Jack Tang 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.

More on Investing Articles

Young female business analyst looking at a graph chart while working from home
Investing Articles

After collapsing 28% today, are Bunzl shares too cheap to ignore?

A poor trading statement has sent Bunzl shares to multi-year lows. Could now be a good time to consider investing…

Read more »

Investing Articles

These 5 stocks could earn £1,600 of annual passive income in a £20,000 ISA

Harvey Jones shows how to generate a high and rising passive income by buying a balanced mix of high-yielding FTSE…

Read more »

Young woman holding up three fingers
Investing Articles

3 things I like about Greggs shares

Greggs shares have tumbled by more than a third over the past year. But this writer has no plan to…

Read more »

artificial intelligence investing algorithms
Investing Articles

Nvidia stock: beware the bear market rally

Andrew Mackie argues that investors should tread carefully before investing in Nvidia stock, as the worst of the sell-off could…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

Up 73% in one year, is this the best value stock in the FTSE 100?

A brilliant run of form suggests this FTSE 100 giant should no longer make the cut as a value stock.…

Read more »

Investing Articles

The best could yet be to come for UK shares! I’m buying these ones

Amid ongoing stock market turbulence, this writer's been adding selected UK shares to his portfolio. Here's why and what he…

Read more »

Top Stocks

4 UK stocks trading well below book value to consider buying

Sometimes, it pays to be contrarian: who says the UK market has priced a stock precisely right, anyway?

Read more »

Investing Articles

The S&P 500’s 12% off its highs. Is now a good time to buy US shares for an ISA?

Right now, a lot of British investors are wondering whether it’s a good time to buy US shares. Here, Edward…

Read more »