Investors searching for passive income could do a lot worse than consider the London Stock Exchange‘s large range of investment trusts. Here are two that I think are worth a close look today.
As you’ll see, their forward dividend yields sail past the UK blue-chip average.
Foresight Environmental Infrastructure
Investing in utilities can be an effective strategy when broader economic times are challenging.
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Sure, earnings can be impacted by higher interest rates. But on the whole, the essential commodities they provide to homes and businesses — whether that be water, gas, or electricity — can provide excellent profits stability.
This is an essential quality that gives utility companies financial means and the confidence to consistently pay a decent dividend.
Investors have a huge range of utilities shares and related investment vehicles to choose from today. One investment trust I like is Foresight Environmental Infrastructure (LSE:FGEN), whose forward dividend yield is a gigantic 10.9%.
This company has its finger in many pies when it comes to harnessing the growing green economy. It owns wind and solar farms, hydro plants, waste management sites, and biomass projects, to name just a handful of asset categories it’s involved with.
In total, it owns 41 projects spanning Europe. It’s a range that provides added protection for investors, as localised issues like adverse weather conditions and regulatory changes can be effectively absorbed, safeguarding earnings and dividends.
Renewable energy trusts like this also have considerable long-term growth potential as the world steadily switches away from fossil fuels. Dividends here have risen every year since it listed on the London stock market in 2014. It’s a run I expect to continue.
Schroder European Real Estate Investment Trust
Schroder European Real Estate Investment Trust (LSE:SERE) is another investment trust I think’s worthy of attention from dividend chasers. Its classification as a real estate investment trust (REIT) means at least 90% of annual rental earnings are guaranteed to be paid out to shareholders.
Furthermore, at 7.9%, its forward dividend yield is more than double the FTSE 100 average.
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As the name suggests, this trust focuses on Europe and holds a diversified portfolio of properties. These include food and DIY retailers, warehouses, logistics hubs, and office space. And they are based in so-called “winning cities” (including Paris, Berlin, and Hamburg) that have substantial long-term growth potential.
Theoretically, the trust’s focus on cyclical sectors could leave earnings more vulnerable to turbulence during economic downturns. However, with around 50 tenants, it effectively minimises rent collection and occupancy issues at the group level.
I also like Schroder European Real Estate Investment Trust because of its strong balance sheet. With a loan to value of just 25%, it has substantial flexibility to continue paying a large dividend even if profits disappoint in the near term.
