Investment Trusts are a great vehicle to include in an income portfolio. Many have steadily increasing dividends that are well covered by the trust’s current income and reserves from prior years.

In this article, we highlight three income investment trusts that are ideal pillars for investors seeking long-term investments that provide a blend of capital appreciation and stable dividend income.

Income Investment Trusts:

• abrdn Equity Income Trust
• CT Private Equity Trust
• JPMorgan Global Emerging Markets Income Investment Trust

abrdn Equity Income Trust – 6.3% yield

The abrdn Equity Income Trust has notched up 24 years of continuous dividend per share growth and even increased dividends during the pandemic when many companies slashed their payouts.

Perhaps the most interesting observation is that the dividend has been covered by earnings each year of the manager’s tenure, apart from two years during the pandemic.

The trust’s dividend yield is 6.3%, which is far higher than the FTSE All-share benchmark yield and the FTSE 100.

Around 50% of the trust’s portfolio is weighted to the FTSE 100, so you’d expect to see stalwarts such as Imperial Brands, BP, HSBC, and Barclays in the top holdings. But the trust is index-agnostic and is actually underweight the FTSE 100 compared to the All-share index. This means it is overweight the midcap FTSE 250 index and small-cap index. It even has a very small proportion of the portfolio in AIM.

An unconstrained approach means the managers led by Thomas Moore are free to seek out high-yielding companies across the UK equity universe to secure benchmark-beating yields. This gives the abrdn Equity Income Trust an edge and means it is one of the highest-yielding UK equity income investment trusts available to investors.

The consistency of this trust’s dividend growth is difficult to beat, and the stability of the NAV makes it a compelling income play.

abrdn Equity Income Trust Investor Presentation:

CT Private Equity Trust – 5.9%

There’s quiet optimism that 2025 could be a good year for private equity managers. Interest rates are set to fall, and the market is ripe for a wave of M&A. This would create perfect conditions for private equity investment trusts such as CT Private Equity Trusts to realise positions and improve their cash positions.

It is estimated that in Europe and the US there are over 400,000 companies with over £10 million compared to just 11,000 public companies. This is a huge untapped pool of companies that private equity investment trusts, such as the CT Private Equity Trust, provide investors with access to companies that may otherwise be out of reach.

CT Private Equity boasts 25 years of outperformance of the FTSE Share total return and has even outperformed Berkshire Hathaway over this period. Indeed, CTPE has returned 4.1x the returns of the FTSE All Share over this period. 

The trust focuses on the smaller end of the private equity market, allowing the managers to build a portfolio of over 500 underlying companies to provide diversification and flexibility.

Private equity trusts have the option to invest directly into to underlying companies or invest via other specialist private equity funds. The CTPE trust is comprised of 50% direct investments into private companies and 50% into funds allowing the managers to harness their own deep expertise as well as a wide network of private equity managers.

Not only does the trust offer an eye-catching yield, but investors buying at this point can secure deep value through the trust’s 30% discount to NAV. An improving economic outlook will likely see this narrow and provide material capital gains.

CT Private Equity Trust Investor Presentation

JPMorgan Global Emerging Markets Income Investment Trust – 4.1%

The JPMorgan Global Emerging Markets Income Investment Trust focuses on quality emerging markets companies that provide both a respectable yield and opportunity for growth.

The trust includes names such as Tencent, Samsung, Alibaba, and Infosys.

One of the pitfalls of an income strategy is selecting high-yielding stocks that turn out to be value traps. High yields often come with high risks. To mitigate this, the managers of the trust employ a stock selection strategy that largely avoids the highest-yielding stocks in the emerging market universe.

The trust targets a dividend yield of between 3% and 6% for any given company. Around 60% of the portfolio companies fall into this range, while around 20% have a yield lower than 3%, and 20% have a yield higher than 6%.

Regarding geographical breakdown, the trust is weighted to markets with a culture of paying dividends and, importantly, attractive yields. The low-yield, highly valued Indian stock market means the trust is less exposed to China, which is not only better valued on an earnings basis but it is a better place to find quality companies ramping up their shareholder distributions. Tencent and Alibaba are great examples of this.

The trust yields around 4% currently, and the opportunity for capital growth from leading emerging markets stocks over the long term makes this trust an interesting choice for those seeking exposure to EM and a blend of growth and income.

JPMorgan Global Emerging Markets Income Investment Trust Investor Presentation: