The UK income trust is performing well but has an unusual structure. We take a deep dive into its portfolio and positioning
Published on September 4, 2026
by Helen Kirrane ShareSave
UK equity income trust Law Debenture (LWDB) has had a strong 2026 so far, returning around 21 per cent – well ahead of the 12 per cent delivered by its benchmark, the FTSE All-Share.
Its longer-term performance looks even more impressive: over three and five years, it is the second-best-performing trust in the 17-strong UK equity income sector and takes the top spot over a decade with returns of 267 per cent.
A consistent approach has been key to this result. James Henderson has been involved in running the trust for over 30 years and was joined by Laura Foll as joint portfolio manager in 2019.
In July, the trust announced that Henderson will be retiring next June, leaving Foll at the helm. Such a high-profile departure would typically spark concerns about style drift, but analysts seem to think it is unwarranted this time because Foll and the veteran manager have worked side-by-side for many years.
We take a deeper look at Law Debenture’s approach and speak to Foll about how the managers are positioning the portfolio.
Approach and structure
The pair adopts a moderately contrarian approach to find well-managed companies at low valuations. They seek to avoid concentration, maintaining around 140 holdings. “This is not a shortlist, high-conviction portfolio. It’s about having a long list of companies that we think are, on balance, too cheap,” Foll tells the IC.
This means they do not take big bets on individual stocks, and instead aim to invest across a broad range of assets. The top 10 holdings make up just 25.9 per cent of the portfolio. “We’re deliberately not taking too much stock-specific risk. We want [the portfolio] to be diverse rather than having big chunky holdings in any particular name,” explains Foll.
On this front, Law Debenture differs from rival Temple Bar (TMPL), which is the best-performing UK equity income trust over five years and has benefited from taking bigger contrarian bets.
Law Debenture is unique in that 15 per cent of its net asset value (NAV) comprises an independent professional services (IPS) business it owns.
This provides third-party financial services, such as pension trusteeship, and the profits it generates are redistributed as dividends to Law Debenture shareholders. Martyn King, an analyst at Edison, describes it as “a very important part of the trust’s overall performance” as the business has funded roughly a third of the dividends the trust has paid in the past 10 years.
This makes for a dependable income stream. “I basically know that at the start of any calendar year, when I turn up on day one, a third of the income is pretty much in the bag,” says Foll. This, in turn, affords the managers flexibility to invest in stocks not paying dividends that are not traditionally found in other UK equity income portfolios.
That’s not to say the trust eschews the usual UK income payers altogether. A look under the bonnet reveals HSBC (HSBA), Shell (SHEL), GSK (GSK) and Rio Tinto (RIO) among the five largest holdings.
Woman riding her old fashioned bicycle along the Beach Esplanade at Aberdeen, Scotland.
When it comes to passive income, investors often focus on chasing the highest yields available. But the real mistake is not picking the wrong yield it’s misunderstanding what actually makes income sustainable over time.
What actually makes passive income sustainable?
Sustainable passive income typically comes down to five key factors:
Earnings support
Cash flow strength
Payout discipline
Sector structure
Balance sheet resilience
At first glance, many income investors focus on the dividend yield. But each of these factors plays a more important role in determining whether that income can be maintained and potentially grown over time.
Earnings support is the foundation. Dividends are ultimately funded by profits, not share prices, and inconsistent earnings tend to lead to inconsistent income.
Cash flow strength matters just as much. Even profitable businesses can struggle to convert earnings into distributable cash, which creates hidden pressure on dividends.
Payout discipline determines flexibility. Companies that distribute too high a proportion of earnings have less room to absorb shocks when conditions deteriorate.
Sector structure also plays a role. Some industries naturally generate more stable revenue streams, while others are highly cyclical and more exposed to downturns.
Finally, balance sheet resilience provides protection when conditions weaken. High debt levels can force dividend cuts even when the underlying business remains profitable.
Taken together, these factors show that passive income is less about maximising yield, and more about identifying businesses capable of sustaining payments through different market conditions.
Importantly, the demand backdrop is also changing. Electricity networks are increasingly being shaped by structural trends such as AI-driven data centre growth, electrification of transport, and rising power demand across industrial systems. These are not cyclical drivers in the traditional sense, but longer-term shifts in energy usage.
That matters because regulated utilities typically earn returns based on the size of their invested asset base. As demand for grid capacity increases, investment tends to rise, which in turn expands that asset base over time.
In simple terms, growth in demand feeds through into more predictable earnings rather than volatility.
Of course, risks remain. Higher investment requirements can increase leverage, and rising interest rates can affect financing costs and regulated returns. There is also ongoing regulatory oversight that ultimately determines allowed earnings.
Bottom line
No income portfolio will ever tick every box all the time. Some stocks offer higher growth, others offer more stability, and very few deliver perfect consistency across all five criteria.
That’s why passive income investing is ultimately about balance rather than perfection â combining different types of businesses to create a portfolio that can hold up across different market conditions.
There are also other passive income ideas worth exploring that show how different approaches can work in practice.
The SNOWBALL has a comparator share, where if 100k of seed capital had been invested on the same date as the SNOWBALL, how much income could you take today ?
The comparator share is VWRP and the income comparison is using the 4% rule. More information on the 4% rule if you use the search box above.
The 2026 income for the SNOWBALL will be 12k, which is currently being re-invested to buy more shares that pay a dividend.
The current income for VWRP is £6,920. When the markets fall that figure will most probably fall.
When the markets fall the SNOWBALL will be able to re-invest the earned dividends at a higher yield.
Looking further ahead the income for the SNOWBALL in less than ten years should be 24k and the income from VWRP is the known unknown.
Safety in numbers.
Whilst you still may buy a clunker, inside a collective if one share cuts their dividend it makes very little difference to the paid out dividend.
Brett Owens, Chief Investment Strategist Updated: September 2, 2026
Three investors walk into a bar and start talking retirement. But just two of them volunteer their honest opinions.
The third sits there and haughtily judges them!
First up, a 75-year-old retiree. He looks at what the S&P 500 (America’s ticker!) offers these days. Today, it’s never paid less. Our veteran investor shrugs and gives up on dividends: “Not much you can do about these paltry yields.”
His counterpart is a 79-year-old who was told as a young man that he would care more about his dividends as he aged. Yup. (Spoiler alert! “They” were right, the man says. More from him later.)
Meanwhile, their judgy counterpart is, of course, a professor! He lacks their experience in the markets but that doesn’t stop him from casting aspersions. They’re both kidding themselves, he taunts. He even has a name for their mistake: the “free dividend fallacy!”
One correction on the story above. It wasn’t a bar—all three turned up in the same Wall Street Journal story. Yet reading it made me feel like I’d been overserved at our hypothetical dividend tavern. Let’s break down why the investors’ stories are relevant to our retirement goals.
First, the 75-year-old shrugging about low yields. Why? I suspect two reasons.
For starters, his quote smells like a roll of Benjamins. The type rich guys peel off and give to their kids. In fact, he mentions in the story that rather than reinvest his dividends, he’s handing the checks to his children instead.
Obviously not a dude who needs every dividend payment. He’s a retired doctor, and I assume his cash pile climbs plenty high.
But lots of dough, believe it or not, can be an income handicap. You receive too much vanilla financial advice. He mentions money market funds and yes, when your nest egg is sizeable enough, 3% payouts will cover the bills. And you can lament it is what it is at the country club without too much actual pain.
For you and me though, the multi-million-dollar option isn’t on the table. And that’s OK because we have available lanes on our income highway that pay 7%, 8% or even better. This yield advantage lets us generate as much passive cash flow on our $1 million as our doctor friend does on $2.5 or $3 million.
With 8% yields, we can collect $80,000 on a $1 million nest egg, without having to sell a single share. That’s 7%, or $70,000, better than America’s ticker, which yields an all-time low 1% today:
And here’s the advantage of this strategy: It makes our day-to-day way more peaceful and a lot less stressful. We don’t have to follow the market. We don’t live by whether the S&P 500 is up or down today. Yes, our account balance bounces around with everyone else’s. Our income doesn’t.
Here’s why. That $80,000 works out to $6,667 per month, hitting our account like clockwork. Now, contrast that with the withdrawal strategy—selling shares every month to raise the same $6,667. Suddenly, it matters a great deal whether the market is up or down!
A down market becomes the worst thing for us, because we must sell more shares of SPY to raise our $6,667. We find ourselves rooting for the market to rally so we sell fewer. But the market doesn’t care what we need! The market does what the market does and this market is a roller coaster. Do you want a bad month putting a dent in your retirement?
Here’s the choice. I ran the numbers on it. You can take $1 million in SPY and withdraw $6,667 every month, selling shares along the way. But if you try this during a down year like 2022, you’ll consume 36% more of your shares than selling in a calm year. And the shares are gone for good!
See, the problem is that when we sell lots of shares low, these shares never come back. Our principal has been reduced—permanently.
Our professor friend says it’s all the same. Well—how is it all the same if we sell more shares when stocks are low?
To be fair, the professor has a point. Dividends are not free money. When a company pays out a dollar, the share price drops by that dollar. He’s right about that.
He’s also right to warn people who chase a yield without verifying the income stream behind it. Market history is filled with companies that paid dividends they couldn’t afford to keep investors from selling, only to hit the wall and lose them with a dividend cut later.
We, as careful contrarians, know this. We do the math on what’s funding our dividends before we buy them. We check that a fund earns more than it pays out. When it does, the payout comes from profits—not from our principal. The fallacy only bites the folks who never check.
Where the professor loses me is at diversification. He warns that dividend investors end up un-diversified. That’s true, if you don’t know what you’re doing. Our income portfolio spreads across six independent buckets, among them Safe Muni Bonds paying 7% to 8% (federal tax-free, so we keep more of it), Energy Toll Collectors—our oil and gas pipelines—and our Dividend Lifeboats, covered-call funds paying 9% to 11%. Plus, a bond-fund lane paying up to 17% (yes, 17%). And two more buckets we’ll save for another day.
These six payout streams don’t rely on the same engine. For example, muni coupons don’t care what option premiums did this month.
Contrast that with the S&P 500. Did you know that just seven stocks make up one-third of the index? One-third! Should be called the S&P 7:
And here’s the uncomfortable part that newbie dividend investors don’t want to hear: Dividends can disappear. UWM Holdings (UWMC) suspended its dividend and its stock plunged 35%. Papa John’s (PZZA) pulled its payout the very next day.
When we build an income portfolio, we’re not buying, holding and closing our eyes forever. We watch our payers. We make sure the businesses we own keep generating enough cash to fund their payouts. If and when the landscape or the fundamentals change, we move money between positions.
In other words, we never have to sell shares to pay the bills. When we move money between payers, that’s our choice—made on our schedule.
And hey, if we’re doing it wrong according to a judgy WSJ professor, that’s just fine with us.
Which brings me back to our 79-year-old friend at the bar. As a young man he was told he’d care more about his dividends with every year that passed. Now comfortably retired, he says, “Now I can attest to that as fact!” Smart… and our kind of guy! The professor can keep the fallacy. We’ll keep the checks.
If you have your own Snowball, it will return income in the form of dividends to re-invest when markets are falling. Luckily Bear markets are much shorter than Bull markets, so when markets start to rise, not only will you receive more dividends to re-invest, you should make a capital gain on the shares bought as the market fell.
If a Downturn Is Coming, 50 Years of Market History Says This Is the Single Best Response
Wall Street history is pretty clear: if there’s a bear market on the way, you’ll probably want to follow Winnie the Pooh’s sage advice.
By Reuben Gregg Brewer – Sep 5, 2026
Key Points
The stock market goes up and down over time, but the long-term trend is upward.
Getting caught up in the zigs and zags of Wall Street could leave you worse off than simply doing nothing.
Winnie the Pooh probably isn’t the investment guru that first comes to mind when you think about Wall Street. And yet he has offered some pretty sage investing advice: “Doing nothing often leads to the very best of something.” The history of investing over the past 50 years very clearly shows that this fictional, honey-loving bear could be on to something. Here’s why.
The S&P 500 goes up and down, and then up again
Turning to a real person, iconic investor Warren Buffett, the former CEO of Berkshire Hathaway(BRKA-0.48%)(BRKB-0.41%), has said that “Investing is not a game where the guy with the 160 IQ beats the guy with the 130 IQ. Once you have ordinary intelligence, what you need is the temperament to control the urges that get other people into trouble in investing.”
Image source: Getty Images.
The issue of temperament is where Buffett and Pooh intersect. That’s because the S&P 500 index‘s (^GSPC-0.38%) history shows that Wall Street switches between bull and bear markets in a zigzag fashion, while generally moving higher over time. The chart below shows that simply buying and holding the S&P 500 index would have yielded a positive long-term outcome if you had the temperament to do nothing while it gyrated in the short term.
In fact, Warren Buffett has actually suggested that most investors would be better off just buying the S&P 500 index and… doing nothing. That’s not entirely true; Buffett would likely recommend continuing to regularly buy an S&P 500 index ETF, such as SPDR S&P 500 ETF(SPY-0.39%) or Vanguard S&P 500 ETF(VOO-0.38%), regardless of market conditions.
Think long term, even when Wall Street is thinking short term
Buying every month (or at another regular interval) is known as dollar-cost averaging, which can be a powerful wealth-building tool. But the real key is to avoid market timing, or trying to buy and sell to take advantage of short-term price movements. That is difficult, if not impossible, to do successfully over the long term. Market timing would be one of the “urges” that get investors into trouble. And if you have the right temperament, 50 years of Wall Street history says you shouldn’t do it.
Instead, you should channel your inner Winnie the Pooh and do nothing. Well, nothing other than sticking to the same investment plan you had before the bear market downturn. In the end, buying and holding for the long term has a pretty incredible 50-year track record.
Most of the growth happens in the later years, when returns start earning returns at a larger base.
WSP looks like a long-run compounder with record backlog and rising profitability, supported by global infrastructure demand.
The key risks are valuation, acquisition execution, and how AI changes parts of engineering work.
A $10,000 investment doesn’t look like the beginning of a fortune. Give it 20 years, though, and it can become surprisingly ambitious.
At an illustrative 8% annual return, a single $10,000 investment left to compound for 20 years would grow to about $46,610. No additional contributions. No perfectly timed trades. Just time doing something investors frequently underestimate.
The Ontario Securities Commission’s investor education site describes compounding simply: returns are reinvested so they can begin earning returns of their own. The longer that process continues, the larger its contribution becomes. The early years are the least exciting part.
Decades of income
After 10 years at an illustrative 8%, $10,000 becomes roughly $21,589. That’s already respectable. Leave it invested another decade and the value more than doubles again.
* Returns as of July 30th, 2026
TIME INVESTED
ILLUSTRATIVE VALUE AT 8%
Starting investment
$10,000
10 years
$21,589
15 years
$31,722
20 years
$46,610
An 8% return isn’t guaranteed. Stocks certainly won’t deliver it in a tidy straight line, either. Some years could produce enormous gains and others will make investors question every decision they’ve made since breakfast. The point is what happens when gains remain invested.
After 20 years, the original $10,000 generated roughly $36,610 of growth. The investor supplied less than one-quarter of the final portfolio value. Compounding did the rest. That’s why I’d rather own quality businesses for years than constantly hunt for the next short-term winner. Compound growth needs something productive to compound.
WSP
WSP Global (TSX: WSP) provides engineering, design, and consulting services across transportation, buildings, water, energy, and environmental projects around the world.
That puts WSP stock behind a huge amount of infrastructure investors rarely think about. Roads need designing. Power grids need expanding. Water systems need upgrading. Data centres, transportation projects, and new energy infrastructure all require engineers long before the ribbon-cutting photos appear.
The latest quarter suggests customers aren’t running out of projects. WSP stock finished its second quarter with a record $20.1 billion backlog, up 23.2% from a year earlier. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) increased 28.8% to $815 million, while organic net-revenue growth accelerated to 5%.
Looking ahead
Management also increased its 2026 financial outlook. For a long-term investor, that backlog may be the most interesting number. It represents work already waiting to be completed, giving WSP stock unusually good visibility into future revenue.
Meanwhile, WSP stock recently traded around $197. That remains roughly one-third below its 52-week high near $291. So, the stock isn’t exactly cheap at around 27 times trailing earnings. Even so, investors are paying considerably less than they were near the peak despite WSP producing record backlog and stronger profitability.
Part of the concern centred on whether artificial intelligence (AI) could eventually automate portions of engineering and design work. I wouldn’t dismiss that risk. WSP stock also grows heavily through acquisitions, and paying too much or integrating a major deal poorly could damage returns.
Its recent pursuit of Dutch engineering firm Arcadis shows both sides of that strategy. A successful acquisition could expand WSP stock substantially, but increasingly large deals also require increasingly careful capital allocation.
Bottom line
That’s why I wouldn’t buy WSP stock expecting another 8% every year like clockwork. I’d buy it because infrastructure spending, electricity demand, urban growth, and aging public assets can provide decades of work. Investors buying stocks in Canada don’t need every holding to double tomorrow.
Sometimes $10,000 simply needs a good business and enough time to become $46,610.
