The best flexible Cash ISA on the market at the moment offers a pathetic interest rate of just 1.46%.
This tiny amount of income does not even beat inflation, and with that being the case, I think now could be the time to dump your Cash ISA and invest in investment trusts instead.
The great thing about investment trusts is that they are companies in their own right, and there is no obligation for them to pay out dividends received from their portfolios to shareholders.
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This means trusts can hold some money back in the boom years, to maintain payouts in the lean times. This flexibility has helped some trust achieve dividend track records of as long as five decades.
Record-holder
The City of London (LSE: CTY) has one of the most impressive dividend records of any investment trust. It has been paying and increasing its distribution for 53 years now.
Managed by Job Curtis, who has been running the fund since 1991, City of London’s portfolio is dominated by high-quality blue-chip stocks. For the 10 years to the end of September 2019, the trust produced a total return for investors of 177.7%, outperforming its benchmark by 45.3%.
The company owns 97 holdings in its portfolio and charges just 0.39% per annum in fees. That’s nearly half of what Neil Woodford was charging for his flagship Equity Income Fund.
At the time of writing, City of London supports a dividend yield of 4.5% and trades at a slight premium of 3.2% to net asset value.
Multi-manager
Shires Income (LSE: SHRS) is my next income investment trust pick. Unlike City of London, this company invests in other managers as well as fixed income securities and traditional equities.
The top holding in the portfolio is the Aberdeen Smaller Companies Income Trust, and the next four holdings are all high-yield preference shares. Around 30% of the portfolio is allocated to fixed income.
This focus on high-yield securities means Shires offers more in the way of income for investors.
At the time of writing, shares in the company offer a dividend yield of 5%. It charges an annual management fee of around 1% with all costs included, and currently trades at a discount to net asset value of 1%.
Emerging income
The final investment trust that I’m going to profile is the Henderson Far East Income Trust (LSE: HFEL).
With a dividend yield of 6.2% at the time of writing, this trust supports the highest yield in this piece. It is currently trading at a premium to net asset value of 1.5% and charges an annual management fee of 1.1%.
Launched in May 1930, the goal of the Far East Income trust is to provide shareholders with a growing annual dividend and capital appreciation from a portfolio of investments across the Asia-Pacific region.
Top holdings include Macquarie Korea Infrastructure Ord and China Construction Bank. So, if you are looking to diversify your portfolio away from the risk of Brexit, this company might be the perfect vehicle to do so.
Around a quarter of the portfolio is invested in Chinese stocks, with a further 17% in Australian shares and 13% in Singapore-listed equities. The trust’s performance over the past 10 years has been highly impressive. Including dividends paid to investors, the share price has produced a total return of 127%.
