Seven of these ‘dividend heroes’ boast more than 50 years of consecutive increases.
There are 17 investment trusts that have increased their dividends for more than 20 years, two fewer than last year as Invesco Income Growth and Scottish Investment Trust merged with other trusts.
The Association of Investment Companies’ (AIC) latest list of “dividend heroes” includes seven funds that have now increased their dividends for 50 or more consecutive years.
City of London (LSE:CTY), Bankers (LSE:BNKR) and Alliance Trust (LSE:ATST) are out in front with 55 years of dividend rises, followed by Caledonia Investments (LSE:CLDN) (54 years), BMO Global Smaller Companies (LSE:BGSC) (51 years), and F&C Investment Trust (LSE:FCIT) (51 years). The latest addition to the over 50 years club is Brunner (LSE:BUT), which announced its 50th year of increased dividends in February this year.
A further four dividend heroes have increased their dividends each year for between 40 and 49 years and three dividend heroes have increased their dividends consecutively for between 30 and 39 years, according to the trade body.
F&C, the UK’s oldest investment trust, last week announced it had upped dividends by 5.8% in 2021. This was ahead of an inflation rate of 5.4% in December, as measured by the Consumer Prices Index.
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Investment companies’ ability to hold back up to 15% of the income they receive each year in a revenue reserve gives them an advantage in delivering income to investors.
This structure came into its own during the global financial crisis and again during the Covid-19 pandemic. Boards dipped into their reserves to top up income shortfalls from underlying investments so that they could maintain their long track records of raising their dividend year in, year out.
While buying investment trusts that are committed to increasing dividends is an important consideration for income seekers, not all dividend heroes have attractive yields.
Technology investor Scottish Mortgage yields just 0.39% despite raising its payout for 39 years, and BMO Global Smaller Companies yields just 1.2% even though it has notched up 51 years of consecutive dividend increases.
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The highest yielding dividend heroes are Aberdeen Standard Equity Income (LSE:ASEI), City of London (LSE:CTY), Merchants Trust (LSE:MRCH) and Value and Indexed Property Income (LSE:VIP). All yield around 5%.
Annabel Brodie-Smith, communications director of the AIC, said: “It’s a great achievement that we now have seven dividend heroes with at least half a century of unbroken annual dividend increases.
“These dividend heroes have consistently raised their dividend every year during the inflationary environment of the 1970s and through the market crashes of Black Monday, the tech bust, the financial crisis and the pandemic.”
|Investment company||AIC sector||Number of consecutive years dividend increased||Dividend yield (%)||Five-year annualised dividend growth rate (%)|
|City of London||UK Equity Income||55||4.97||3.74|
|Caledonia Investments||Flexible Investment||54||1.86||3.64|
|BMO Global Smaller Companies||Global Smaller Companies||51||1.20||10.34|
|F&C Investment Trust||Global||51||1.60||5.38|
|JPMorgan Claverhouse||UK Equity Income||49||4.49||5.81|
|Murray Income||UK Equity Income||48||4.30||1.36|
|Scottish American||Global Equity Income||48||2.73||3.21|
|Merchants Trust||UK Equity Income||39||5.15||2.53|
|Value and Indexed Property Income||Property - UK Commercial||34||5.47||3.22|
|BMO Capital & Income||UK Equity Income||28||3.99||2.41|
|Schroder Income Growth||UK Equity Income||26||4.35||3.84|
|Aberdeen Standard Equity Income||UK Equity Income||21||6.29||6.60|
Source: AIC/Morningstar. Data at 09 March 2022.
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