Investment trusts: top investments for income

Looking for income from your investments? One of these 'Dividend Heroes' may be worth a look.

The vast majority of investments held in stocks and shares ISAs are either shares or unit trusts, according to Government statistics. But it could pay to consider putting other forms of investments in your ISA too.

If you are looking for income then an investment trust is well worth considering. An investment trust is basically a company (they are also known as investment companies) that invests in other companies and assets. You own shares in the investment trust, just as you would for any firm quoted on the London Stock Exchange, which is where it really differs from unit trusts. You can get a full run down of how they work in our Beginner's guide to investment trusts.

And investing in one is a smart move if you are looking for income from your investments. Research from the Association of Investment Companies (AIC) has found that 21% of its members that have been in existence for more than 10 years have raised their dividends for at least 10 years in a row.

A whopping 50% of the AIC’s UK Equity Income sector has raised dividends for 10 consecutive years, while 29% of the UK Smaller Companies sector and 27% of the Global sector have also managed over a decade of dividend growth.

Here’s a list of the AIC’s ‘Dividend Heroes’ – the Investment Companies that have increased their dividend for at least 10 consecutive years.

Investment company	AIC Sector	Dividend Increases
Schroder Income Growth	UK Equity Income	19 years
Invesco Income Growth	UK Equity Income	17 years
Threadneedle UK Select Trust	UK All Companies	17 years
F&C Capital & Income	UK Equity Income	17 years
Northern Investors Company*	Private Equity	17 years
Aurora	UK All Companies	16 years
Perpetual Income & Growth	UK All Companies	15 years
Standard Life Equity Income	UK Equity Income	14 years
BlackRock Smaller Companies	UK Smaller Companies	11 years
BlackRock Throgmorton Trust	UK Smaller Companies	11 years
TR European Growth	UK Equity Income	11 years
Henderson Smaller Companies	UK Smaller Companies	11 years
Henderson EuroTrust	Europe	11 years
Establishment Investment Trust	Global	11 years
Athelney	UK Smaller Companies	11 years
Aberdeen New Dawn	Asia Pacific - Excluding Japan	10 years
Witan Pacific	Asia Pacific - Excluding Japan	10 years
Artemis Alpha Trust	UK All Companies	10 years

*This company is in the process of realising its assets

The AIC has also released a list of investment companies that have been raising their dividend for over 20 years.

Investment Company	AIC Sector	Dividend Increases
City of London Investment Trust	UK Equity Income	48 years
Bankers Investment Trust	Global	48 years
Alliance Trust	Global	48 years
Caledonia Investments	Global	47 years
Foreign & Colonial Investment Trust	Global	44 years
F&C Global Smaller Companies	Global	44 years
Brunner Investment Trust	Global	43 years
JPMorgan Claverhouse Investment Trust	UK Equity Income	42 years
Murray Income	UK Equity Income	41 years
Witan Investment Trust	Global	40 years
Scottish American	Global Equity Income	41 years
Merchants Trust	UK Equity Income	35 years
Scottish Mortgage Investment Trust	Global	32 years
Scottish Investment Trust	Global	31 years
Temple Bar	UK Equity Income	31 years
Value & Income	UK Equity Income	27 years

Invest in a 'dividend champion' via a Stocks & Shares ISA

The appeal of investment trusts

Income isn’t the only reason to think about including investment trusts in your ISA.

“A major benefit of investment trusts is that they are usually quite cheap and so you can gain access to your chosen investment at relatively low cost,” says Patrick Connolly, a certified financial planner at Chase de Vere. “Also, many investment trusts engage in gearing. This is where they borrow extra money to invest and so this gives an added boost to returns if the underlying investments perform well.”

But it's worth noting that gearing can also magnify losses so investment trusts can prove more risky than unit trusts.

Invest in a 'dividend champion' via a stocks & shares ISA