Ian Cowie: inflation-beating trust yielding 6% is going cheap

Can investment trust shareholders help to make the world a cleaner, greener and better place? Well, yes, we can.

Before I describe one specific example of how your humble correspondent plays a tiny part in this process, let’s beware that “shareholder” is a boo-hiss word for many folk. They blame us for water companies failing to invest sufficiently in infrastructure to keep pollution out of our rivers.

• Invest with ii: SIPP Account | Stocks & Shares ISA | See all Investment Accounts

Never mind the reason many utilities were privatised in the 1980s was that the government and taxpayers were reluctant to put up the massive sums of capital needed for modernisation. In the case of England’s 10 regional water companies, which were sold off to evil shareholders in 1989, that meant many miles of pipes, plus dozens of reservoirs and sewage farms.

What happened next amounted to a massive failure of regulation, where politicians and the quangos they appointed failed to ensure privatised water companies dealt with pollution properly. Instead, private equity - often owned overseas - loaded these businesses with debt and maximised cash withdrawals, with the woeful consequences that are causing controversy today.

More positively, the £2.4 billion investment trust International Public Partnerships Ord (LSE:INPP), in which I am a shareholder, shows how private capital can deliver something good for the public. Its biggest underlying holding, accounting for a chunky 16% of this fund’s net asset value (NAV), is Tideway; the business that built and operates London’s super sewer.

Without wishing to spoil anyone’s breakfast, Tideway claims it has kept more than 22 million tonnes of sewage out of the River Thames since its super sewer became fully operational in February last year. Tideway reckons this sewage would be sufficient to fill 8,800 Olympic swimming pools. Phew!

• 200 episodes: 11 golden rules we keep coming back to
• ii Top 50 Fund Index: most-bought funds, trusts and ETFs in Q3 2026
• Polar Capital Technology: performance, SpaceX and Al maximalism

Critics question whether Tideway could do a better job - or at least publish more information about pollution in the Thames. But common sense suggests that keeping all that stuff out of the river must be a good thing.

Bear in mind how demand is rising. The population of London has grown by more than one million people since this Cockney was born in 1958, with a total of eight million citizens of the capital back then and more than nine million now.

INPP’s second-biggest asset is Cadent, Britain’s biggest natural gas distribution network, which accounts for more than 15% of NAV. Cadent delivers fuel to 11 million homes and businesses, which is another good deed, with winter on its way.

More controversially, INPP is also a big investor in the Sizewell C nuclear power plant, where this investment trust has committed to put in more than £254 million over the next five years. Sizewell C is expected to become operational in the mid to late 2030s. Then it will keep the lights on when wind and solar won’t work due to dunkelflaute, or periods without wind or sunshine, as often happens in the winter.

Coming down from the clouds of climatology and institutional infrastructure, this small shareholder likes INPP because it yields 6.4% dividend income, which I receive tax-free by holding these shares in my ISA. Better still, this yield has grown by an annual average of 3.1% over the last five years, according to calculations by Morningstar.

• Wild’s Winter Portfolios 2026-27: seeking a 10th year of profits
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis
• Find out the latest UK Budget news here

It is important to beware that dividends are not guaranteed and can be cut or cancelled without notice. However, when announcing INPP’s half-year results last month, its chair, Sarah Whitney, said: “On current forecasts, the company expects to meet its existing progressive (or rising) dividend policy for at least the next 25 years.

“In INPP’s 20th year since listing, it continues to deliver against the same strategy it set out at the initial public offering (IPO), underpinned by a stable and diversified portfolio of essential infrastructure assets.

“With 99% of revenues derived from long-term public sector or regulated sources, the portfolio provides significant inflation protection. That protection of real returns supports the continued track record of fully covered dividends since IPO.”

This investment trust is never likely to surprise with large capital gains but did deliver total returns of 18% over the last year, following 12% over five years and 43% over the decade. Ongoing charges are on the high side, at just over 1%, but few individual investors could access the assets above directly.

• Fund Focus: four small-cap winners making big bets
• Discount Delver: the 10 cheapest trusts on 21 October 2026
• Older generations accelerate financial gifts as IHT changes bite

The shares continue to be priced 11% below their NAV, which might appeal to bargain-hunters as well as investors keen to keep the population warm and the rivers clean. This fund will never shoot the lights out, but it might help to keep them on.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in International Public Partnerships (INPP) as part of a globally diversified portfolio of investment trusts and other shares. For more see iancowie.co.uk