Breaking News
Close
Investing Pro 0
NEW! Get Actionable Insights with InvestingPro+ Try 7 Days Free

Why I rate these champion investment trusts as top defensive investments today

Stock MarketsAug 17, 2020 16:40
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
Why I rate these champion investment trusts as top defensive investments today

I’ve always considered investment trusts to be among the very best long-term defensive investments. There’s a couple of key reasons.

One is that, unlike handing over money to typical fund managers, there’s no conflict of interest. Fund managers are answerable to their bosses, to the companies they work for. They’re there to maximise the size of the slice taken by the company’s owners. But when they’re working for investment trusts, that’s you, me, the people who stump up the cash. When we invest by buying shares in an investment trust, we become the owners.

The other key thing I like about investment trusts is the way they’re allowed to handle dividends. Cash on the books can be accumulated during good spells and is handed out as extra during tougher years. And experience shows that the top trusts manage their cash flow and their dividends in a conservative and sustainable way.

That helps provide a steady income for investors, which many individual companies fail to do. I despair when I see the number of top UK firms paying out dividends they can’t afford, while shouldering increasing debt, looking only to make the next quarter look good. That’s not sustainable, it’s reckless, and it ultimately fails.

53-year investment trusts The Association of Investment Companies keeps a list of dividend heroes that have increased their dividends for the longest periods. The 2020 list shows City of London Investment Trust, Bankers Investment Trust (LON:BNKR), and Alliance Trust (LON:ATST) at the top. Those three have lifted their dividends for an astonishing 53 years in a row.

In the year those magnificent dividend runs started, Sir Alf Ramsey was knighted for the 1966 World Cup victory, the first North Sea gas was pumped ashore, and Trumpton was first shown on British TV.

Best dividend? Of those three investment trusts, City of London is down 26% in 2020, below the FTSE 100. But it has just declared a 2020 dividend of 19p per share, up 2.2% on last year. That’s a yield of 5.8%. With the trust’s biggest investments being top dividend-paying companies, and with plenty of cash reserves, I doubt there’s a better income investment out there today.

The other two investment trusts don’t offer the same yields, but their share prices have been holding up well. Shares in Alliance Trust have lost just 4.6% so far this year (while the FTSE 100 is down 18%). And the Bankers share price is actually in positive territory – up only 1%, but that’s a rare feat in 2020.

Half a century Caledonia Investments (LON:CLDN) has raised its dividend for 52 years in a row (every year since the Ford Escort was introduced). And a whole bunch of investment trusts have increased their dividends every year for 40 years and more.

So, are you looking for safe investments to see you through all the coming crises that will send stock markets crashing through the rest of your working life? I reckon investments trusts like these can form the bedrock of a very dependable portfolio. Then you can just sit back and remember that shares have beaten all other forms of investment for more than a century, through crises far worse than Covid-19.

The post Why I rate these champion investment trusts as top defensive investments today appeared first on The Motley Fool UK.

Alan Oscroft has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2020

First published on The Motley Fool

Why I rate these champion investment trusts as top defensive investments today
 

Related Articles

How Are The FAANG Stocks Doing? Checking In
How Are The FAANG Stocks Doing? Checking In By Benzinga - May 20, 2022

One of the major indices, the S&P 500, is down more than 2% for the week. Those losses are accompanied by two earnings reports from consumer behemoths, Walmart Inc (NYSE:...

Dow Futures Tick Higher as Recession Fears Loom
Dow Futures Tick Higher as Recession Fears Loom By Investing.com - May 19, 2022 2

By Oliver Gray  Investing.com - Dow futures were trading slightly higher during Thursday’s evening deals after major benchmark indices extended losses during the regular session as...

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
Comments (1)
Andrew Smith
Andrew Smith Jul 12, 2021 21:40
Saved. See Saved Items.
This comment has already been saved in your Saved Items
"53-year investment trusts The Association of Investment Companies keeps a list of dividend heroes that have increased their dividends for the longest periods." ?
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Our Apps
DOWNLOAD APPApp store
Investing.com
© 2007-2022 Fusion Media Limited. All Rights Reserved.
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
  • Sign up for FREE and get:
  • Real-Time Alerts
  • Advanced Portfolio Features
  • Personalized Charts
  • Fully-Synced App
Continue with Google
or
Sign up with Email