Two dividend stocks on my radar are Alliance Trust (LSE: ATST) and The Brunner Trust Plc (LSE: BUT).
A big part of this is due to their exceptional track records. However, the future also looks bright.
Let’s take a closer look at them.
Investment trusts for the win
Alliance is one of the largest and oldest trusts in the UK, with roots stretching back to the 1800s. The trust invests in some of the most prestigious businesses across the world.
Similarly, Brunner is also set up as an investment trust, with the same aims. It looks to invest in UK and global businesses to provide its investors with above-average returns.
I’m a fan of investment trusts, as they’re usually run by expert stock pickers. Plus, by investing in a multitude of businesses across the planet, they offer me diversification I may not get by investing in individual stocks.
My investment case
Both Alliance and Brunner have increased their respective dividends for over 50 years! This is remarkable, in my view.
I am aware that the past isn’t an indicator of the future. Plus, dividends are never guaranteed. However, when looking to build wealth, I prefer dividend stocks with a good track record of shareholder value and consistent returns.
Looking specifically at Alliance, I’m excited about its future prospects. The business has a big chunk of its holdings in burgeoning US tech stocks. These include names such as Meta and Microsoft, as well as Nvidia. The artificial intelligence (AI) boom could present excellent growth opportunities. Plus, as the digitization of the world ramps up, these firms, as well as the trust, could continue to grow earnings and returns.
Alliance shares trade on a price-to-earnings ratio of just five, making them look great value for money. Plus, a dividend yield of just over 2% could grow nicely.
Moving over to Brunner, with similar holdings, the business also focuses on other sectors that could provide good growth and returns. Some of these sectors include financial services, as well as industrial and infrastructure.
From a fundamentals view, the shares are a bit dearer, but still attractive, trading on a P/E ratio of 14. A dividend yield of 1.7% could grow, as well as continued increases in payouts, in line with its previous track record.
Risks and final thoughts
For Alliance, high exposure to the tech stocks in the US is risky. This is because economic volatility across the pond could hurt these businesses, and their earnings could be dented by any negativity. We’ve recently seen turbulence in the US hurt many stocks.
Looking at Brunner’s risks, the similarities continue when looking at the bearish aspects. I’m concerned that exposure to cyclical sectors such as financial services could hurt the trust’s earnings and level of returns. For example, financial stocks have been hurt across the globe due to higher interest rates, inflation, and geopolitical issues.
Overall, I’m interested in dividend shares that offer consistent returns, and not just a flashy high yield. For that reason, I’ll be looking to buy shares in both these trusts when I next can.
