Ian Cowie: six income investment trusts for the long term

The Bank of England cut the base rate to 3.75% last month and indicated that it hopes to do so again this year.

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Reduced returns from “risk-free” deposits are likely to increase the relative attraction, and share prices, of investment trusts that yield a high and rising income. So here are six of mine:

Tufton Assets

This ship leasing specialist’s dividends currently equal an eye-stretching 8% of its share price. Better still, investors’ income has risen by a buoyant annual average of 7.4% over the last five years, according to the Association of Investment Companies (AIC).

It is important to be aware that dividends are not guaranteed and can be cut without notice. But if that rate of ascent could be sustained it would double the value of Tufton Assets Ord (LSE:SHIP)’s dividends in less than a decade.

Here and now, the price of high income has been relatively low total returns of 73% over five years and just 3.4% over the last year - it lacks a decade-long record, having been launched in September 2016 - but the shares are priced 16% below their net asset value (NAV), so do not look expensive.

This is the biggest holding in my ISA, plotting a course to make the most of tax-free income.

Greencoat UK Wind

Renewable energy infrastructure funds have fallen out of fashion, taking share prices with them.

Greencoat UK Wind (LSE:UKW) delivered total returns of 66% over the last decade and just 2.3% over five years, followed by a loss of 15% over the last year.

That decline pushed up the yield to a somewhat dubious 10.5%, rising by 7.6% per year over a five-year period.

I say “somewhat dubious” because a double-digit yield might be a warning of further capital destruction to come.

For example, offshore wind farms might not last as long as expected in the very hostile environment of the North Sea.

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I have no idea but note that UKW has increased dividends in line with the Retail Prices Index (RPI) every year since its flotation in 2013 and have no intention of selling shares while they trade 30% below their NAV.

It’s another ISA holding to whistle up tax-free income.

International Public Partnerships

Funding infrastructure can produce inflation-linked income, such as this trust’s 7% yield, rising by 3.1% a year over a five-year period.

Once again, the price of high yield was relatively low total returns of 52% over the last decade, followed by a loss of 3.7% over five years and a positive 13% over the last year.

Maybe it’s because I’m a Londoner but I like the fact that International Public Partnerships Ord (LSE:INPP)’s main underlying holding is Thames Tideway Tunnel, the 15-mile long super-sewer which claims to have kept 12.9 million tonnes of sewage out of the river since opening in 2024.

Despite doing well by doing good, these shares - another ISA holding - trade at a 15.5% discount to NAV.

BlackRock Frontiers

With more than 24% of assets invested in Saudi Arabia and the United Arab Emirates (UAE), it might seem surprising that this fund yields 4.1% income, rising by an annualised 7.2% over the last five years.

Poland, Turkey and Egypt are the other exotic markets in its top five geographical areas. BlackRock Frontiers Ord (LSE:BRFI) is held in my self-invested personal pension (SIPP), where its lower yield is justified by higher total returns than any of the three shares mentioned earlier.

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It delivered 181%, 88% and 22% over the last decade, five years and one-year periods and is priced 2% below NAV.

Ecofin Global Utilities and Infrastructure

National Grid (LSE:NG.), Britain’s biggest electricity distributor, is this trust’s top asset; followed by Constellation Energy Corp (NASDAQ:CEG), the American nuclear power giant; and NextEra Energy Inc (NYSE:NEE), another low or no-carbon energy provider.

Its 3.6% yield might seem relatively modest but total returns of 44% over five years and 31% over the last year have helped make Ecofin Global Utilities & Infra Ord (LSE:EGL) the seventh-most valuable share in my life savings. It trades 9% below NAV.

Schroder Japan

Until recently, funds focused on the Land of the Rising Sun rarely paid much income and this share’s 3.5% yield might seem nothing to write home about.

But Schroder Japan Trust Ord (LSE:SJG) has adopted an enhanced dividend policy, committing to pay out 4% of average NAV each financial year.

Top holdings feature familiar names, including Hitachi, the energy to healthcare conglomerate; Toyota Motor Corp ADR (NYSE:TM), the car-maker; and Asahi, the brewer.

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Total returns are 185% over 10 years, 89% over five years and 32% over one year. The shares are priced 7% below NAV.

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

Ian Cowie is a shareholder in BlackRock Frontiers (BFI), Ecofin Global Utilities and Infrastructure (EGL), Greencoat UK Wind (UKW), International Public Partnerships (INPP), Schroder Japan (SJG) and Tufton Assets (SHPP) as part of a globally diversified portfolio of investment trusts and other shares.