Revealed: the investment trusts with a 20yr-plus history of raising dividend payouts
The latest ‘Dividend Heroes’ list reveals that three trusts – City of London Investment Trust, Bankers Investment Trust and Alliance Trust – have reached 50 years of consecutive dividend rises.
The list is published by the Association of Investment Companies (AIC) to show how the investment trust structure can be particularly valuable for income-seeking investors.
Unlike funds, investment trusts can store up to 15% of the income they receive each year and use these reserves to boost dividend pay-outs in difficult times.
Job Curtis, manager of City of London Investment Trust said: “City of London’s record of growing its dividend every year for 50 years has been achieved both by investing in good companies and also through the investment trust structure. In the good years for dividends, we add to our revenue reserves which we are then able to use in more difficult periods. Indeed, in seven of the 25 years during my period as fund manager, we have dipped into revenue reserves to help grow the dividend.”
The collapse in sterling following the Brexit vote has boosted dividend pay-outs by UK firms.
Headline dividends climbed almost 12% year-on-year in the final quarter of 2016, according to Capita Asset Services, pushing total UK dividends to £84.7bn in 2016, up 6.6% from 2015.
Two-fifths of UK dividends are denominated in dollars and euros so translated at more favourable exchange rates.
However, Alex Crooke, manager of Bankers Investment Trust, a global trust, said the outlook for income is more muted than previous years, partly because dividends, after lagging the recovery of corporate earnings post the 2008 crash, have now caught up.
“Many companies in the US and Europe are now paying out a relatively high percentage of their earnings as dividends and therefore fund managers need to carefully focus on those industries where earnings are rising.”