Ian Cowie: two income investment trusts for the long haul

Tilting at windmills was an early sign that Don Quixote was going mad in the famous 1605 novel of that name. Now that Donald Trump, the American president, has taken a tilt at Britain’s wind turbines this week, is it time to reconsider investment trusts exposed to renewable energy?

Trump told reporters at Prestwick Airport in Scotland: “You see these windmills all over the place, ruining your beautiful fields and valleys and killing your birds, and if they’re stuck in the ocean, ruining your oceans.”

He claimed the turbines drive whales “loco” and added: “The whole thing is a con job. Germany tried it, and wind doesn’t work.”

• Invest with ii: What is a SIPP? | Is a SIPP right for me? | SIPP Cashback Offers

Never mind all that hot air, the £2.6 billion investment trust Greencoat UK Wind (LSE:UKW) currently blows out 8.3% dividend income, which has risen by an annual average of 7.6% over the past five years, according to independent statisticians LSEG; formerly London Stock Exchange Group.

It is important to beware that dividends are not guaranteed and can be cut or cancelled without notice. However, if that rate of ascent could be sustained, it would double shareholders’ already substantial income in less than a decade.

This exhilarating prospect is enough to earn UKW a place in my ISA, where I hope its handy four-figure annual tax-free income will help to pay for an enjoyable retirement. Better still for buyers today, despite strong long-term returns, recent performance has been disappointing and is reflected in the shares being priced 17% below their net asset value (NAV).

UKW is the top performer over the past decade in the Association of Investment Companies (AIC) “Renewable Energy Infrastructure” sector and ranked second over the past five years, before shrinking over the past year. Its total returns over the three periods were, respectively, 88%; 12% and minus 9.4%.

Elements of the explanation for recent share price weakness include falling electricity output, doubts about dividend cover and NAV. Iain Scouller at the stockbroker Stifel said on Wednesday: “This morning, UKW announced first-half (H1) electricity generation was 14% below budget due to low wind speeds.

“As a result, dividend cover was 1.4 times earnings for H1 as a whole, including two times in Q1 2025, which implies Q2 was barely covered, if at all.

“The NAV also saw a fall over H1 from 151.2p at the end of December last year to 143.4p at June 30, 2025, a decline of minus 5.2%. This is a disappointing set of results given the size of the NAV fall, decline in dividend cover, and we think the discount is vulnerable to widening.”

• Defence’s running hot: is it too late to profit?
• Taking advantage of 25% discount in Hong Kong markets

Against all that, Ben Newell at the stockbroker Investec, noted that UKW has increased its dividends every year since its launch in 2013 by at least as much as the Retail Prices Index (RPI), and repeated his “buy” recommendation. A long track record of preserving the real purchasing power of our income is a powerful attraction for investors nearing retirement.

What do the board of directors think? Three out of UKW’s six directors have more invested in its shares than their annual fees but two of them hold no stock at all and the chair, who has been in place since 2019, holds little more than a tenth of her annual fee in this stock.

More encouragingly, the fund management team hold UKW shares worth £7.1 million, according to Investec’s “skin in the game” research. So, whatever happens next, at least the fund managers and half the board will experience ordinary shareholders’ pleasure or pain.

To return to where we began, Trump has touched a nerve that divides opinion dramatically but this is not the place to get into the ecology or science, for or against, his allegations. From a purely financial point of view, investors who wish to diminish risk by diversification across a wider range of renewable energies might prefer the £3 billion Renewables Infrastructure Group (LSE:TRIG), which yields 8.6% income, rising by 2.5% on the same basis as above.

But TRIG’s total returns have been disappointing recently; over 10 years they were 52%; over five years they were minus 13%; and over one year it lost 11%. No wonder TRIG is trading at a 25% discount to NAV.

• Watch our video: the secret behind 20 years of 15% returns
• Sign up to our free newsletter for investment ideas, latest news and award-winning analysis

Even more diversification across all forms of renewable energy, including controversial nuclear power, is provided by my biggest investment trust holding, Ecofin Global Utilities & Infrastructure Ord (LSE:EGL). This £294 million fund yields 3.8% income, rising by 5% per annum, and trades 9.8% below NAV.

Unfortunately for investors who seek a long track record of historical data on which to base decisions, EGL won’t celebrate its 10th anniversary before September next year. But its total returns over the past five years were 59% followed by 26% over the past year.

This earns EGL its place as the fifth-most valuable holding in my 50-stock “forever fund” and shows how it can pay to accept a lower initial income, albeit rising strongly, in the hope of higher total returns. That is likely to remain true whatever Trump says or whichever way the wind blows.

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

Ian Cowie is a shareholder in Ecofin Global Utilities and Infrastructure (EGL) and Greencoat UK Wind (UKW) as part of a globally diversified portfolio of investment trusts and other shares.