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Investment trusts can be good building blocks for a Stocks and Shares ISA. With this, it is possible to get a wider exposure around the world, usually at a lower cost.
With this in mind, let’s look at two dividend-paying investment trusts targeting different regions. Each I believe deserves further evaluation as candidates for inclusion within the ISA.
In Asia
Let’s start with Asia, the fastest growing region in the world. Despite being projected to contribute about 43 percent of global GDP growth, China and India together are doing well 6% of MSCI All Country World Index.
In contrast, the US makes about 65%. However, this gap will narrow over the next decade as investors seek cheap rates and portfolio diversification amid unpredictable US policy.
One trust I like is the look of it Schroder Oriental Income Fund (LSE: SOI). Although it increased by 33% last year, the FTSE 250 paid a dividend of 3.4 %.
It has a strong track record of dividend growth and is on track to become one of the Association of Investment Companies’ Dividend Heroes. Those trusts have increased their annual profits for at least 20 straight years. Schroder Oriental Income Fund has now made 19.
Another danger here is high concentration, with Taiwan Semiconductor Manufacturing Company (TSMC) accounts for 13% of assets. If the Artificial intelligence (AI) revolution is running out of time, then this major holdover from the world’s largest chip maker could slow down the process.
Seen another way though, it allows investors to benefit from the development of AI infrastructure while still collecting dividends. TSMC’s basics are absolutely ridiculous.
Elsewhere, the portfolio offers exposure to Singapore, Hong Kong, China and Australia. Also, the shares trade at a 5.2% discount to net asset value (NAV).
Latin America
Next, we have Company BlackRock Latin American Investment Trust (LSE:BRLA). This holds the most shares from Latin America, which is home to around 650m people.
And, despite rising 41% over the past year, the dividend yield here is still respectable at 4.6%. Top stocks include mining giants Shut up again Southern Copperas well as Grupo Aeroportuario del Sureste again The Wal-Mart of Mexico.
There is also a small high rise zip there Nu Holdings share price (Nubank), the world’s largest digital bank outside of China.
Concentration risk is also an issue here, as Brazil accounts for around 62% of the portfolio. Although it is the largest economy in Latin America, inflation is still very high.
Then again, Brazil is experiencing the strongest tourism boom in its history, and has a booming tech sector. So the economy is on the way up.
The rise of digital payments in Brazil has created an active financial ecosystem that serves ordinary people. This progress is the result of a combination of the restructuring of the payment regulatory framework, greater use of technology, entrepreneurship and a focus on creating products that address the needs of Brazilian customers..
World Economic Forum.
Meanwhile, Mexico will benefit as US companies bring manufacturing closer to home and away from China (called friendhoring). Mexico has the second largest country share, at about 23%.
Finally, the shares trade at a 6.5% discount to NAV, providing what I see as an attractive entry point worth considering for international income investors.
