Interactive Investor

The 18 investment trusts that have raised dividends for over 20 years

8th March 2023 10:05

Sam Benstead from interactive investor

Eight of these ‘dividend heroes’ boast more than 50 years of consecutive increases.

There are 18 investment trusts that have increased their dividends for more than 20 years, one more than last year due to £4 million UK smaller companies trust Athelney Trust joining the exclusive club.  

The Association of Investment Companies’ (AIC) latest list of “dividend heroes” includes eight 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 56 years of dividend rises, followed by Caledonia Investments (LSE:CLDN) (55 years); Global Smaller Companies Trust (LSE:GSCT) (52 years); F&C Investment Trust (LSE:FCIT) (51 years); and Brunner (LSE:BUT) (51 years). The latest member of the 50-club is JPMorgan Claverhouse (LSE:JCH).

A further five dividend heroes have increased their dividends each year for between 40 and 49 years and one dividend hero has increased their dividends consecutively for between 30 and 39 years, according to the trade body.

interactive investor’s Super 60 investment ideas includes three dividend heroes: City of London (LSE:CTY), F&C Investment Trust (LSE:FCIT) and Scottish Mortgage (LSE:SMT).

Job Curtis has managed City of London since 1991 and his track record over the past 10 years has been strong, with the NAV total returns of 103% (7.3% a year) compared to 88% (6.5% a year) for the FTSE All-Share index

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 0.5% despite raising its payout for 40 years, and The Global Smaller Companies Trust (LSE:GSCT), formerly BMO Global Smaller Companies, yields just 1.2% even though it has notched up 52 years of consecutive dividend increases.

The highest yielding dividend heroes are abrdn UK 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%, with the abrdn trust out in front with a whopping 6.4% yield. 

Annabel Brodie-Smith, communications director of the AIC, said: “It’s remarkable that there are now eight dividend heroes with at least half a century of consecutive annual dividend increases. These dividend heroes are no strangers to difficult times, having raised their payouts to investors through the high inflation of the 1970s, recession of the 1990s and the global financial crisis in 2008. While dividends are never guaranteed, these are track records to be proud of.” 

Investment companyAIC sectorNumber of consecutive years dividend increasedDividend yield (%)Five-year annualised dividend growth rate (%)
City of London UK Equity Income564.653.25
Bankers Global562.244.59
Alliance Trust Global562.3812.77
Caledonia Investments Flexible Investment551.823.64
The Global Smaller Companies TrustGlobal Smaller Companies521.218.48
F&C Investment Trust Global521.45.38
Brunner Global511.975.44
JPMorgan ClaverhouseUK Equity Income504.714.88
Murray IncomeUK Equity Income494.151.91
Scottish AmericanGlobal Equity Income492.694.48
Witan Global482.526.67
Merchants Trust UK Equity Income404.572.44
Scottish MortgageGlobal400.53.66
Value and Indexed Property IncomeProperty - UK Commercial355.812.75
CT UK Capital & IncomeUK Equity Income293.731.99
Schroder Income Growth UK Equity Income274.163.34
Abrdn Equity IncomeUK Equity Income226.45.83
Athelney TrustUK Smaller Companies204.681.53

Source: AIC/Morningstar. Data at 08 March 2023.

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