Interactive Investor

The 2024 line-up of ‘next generation’ trust dividend heroes

Of the investment trusts waiting in the wings to become ‘dividend heroes’, there are plenty of high-yield options.

21st March 2024 10:15

Kyle Caldwell from interactive investor

Overall, these investment companies have higher yields than the “dividend hero” trusts that have raised their payouts year in, year out, for at least two decades.

As reported last week, 20 investment trusts have achieved this feat, with five, City of London (LSE:CTY), Bankers (LSE:BNKR), F&C Investment Trust (LSE:FCIT), Scottish Mortgage (LSE:SMT) and Henderson Smaller Companies, being members of interactive investor’s Super 60 list of investment ideas.

Waiting in the wings to become dividend heroes are 33 trusts that have increased their dividends for 10 or more consecutive years, but fewer than 20.

Trusts joining the next generation list in 2024 include: CT UK High Income (LSE:CHI), Mercantile (LSE:MRC), ICG Enterprise Trust (LSE:ICGT), Canadian General Investments (LSE:CGI), Henderson International Income (LSE:HINT), RIT Capital Partners (LSE:RCP), BBGI Global Infrastructure (LSE:BBGI) and Greencoat UK Wind (LSE:UKW).

Thirteen of the 33 trusts have a dividend yield of over 5%, offering investors high income alongside consistent dividend growth (although bear in mind that this is not guaranteed). In contrast, only seven of the dividend heroes are yielding above that level.

Dividend growth has been higher for the next generation group of trusts. Seven trusts have a five-year annualised dividend growth rate of more than 10%. They are: Fidelity Special Values (LSE:FSV), Law Debenture Corporation (LSE:LWDB), Henderson Opportunities (LSE:HOT), Fidelity European Trust (LSE:FEV), Fidelity China Special Situations (LSE:FCSS), Lindsell Train (LSE:LTI) and CT Private Equity Trust (LSE:CTPE).

In terms of the dividend heroes, only Alliance Trust (LSE:ATST) has achieved annualised double-digit growth over five years, at 13.2%.

Another difference between the up-and-coming dividend heroes and the old guard is more variety in terms of investment sectors. Asia-Pacific, Europe, China, and Infrastructure all feature among next generation dividend hero trusts. For trusts that have increased payouts for between 20 and 56 years, UK and global income strategies dominate.  

Three of the trusts in the next generation list are members of the ii Super 60. They are Fidelity Special Values (LSE:FSV), TR Property (LSE:TRY), and Fidelity China Special Situations (LSE:FCSS).  

Bear in mind that some of the trusts on the list, such as Lindsell Train, put a much greater emphasis on growth over income.

In addition, it is also worth pointing out that while high yields offer investors the prospect of higher income today, there are no guarantees that this will result in market-beating returns from a total return perspective – when both capital and income are combined. In addition, dividend growth may be higher for trusts with lower yields today.

Income-paying investment trusts have a particular attraction for investors who want a regular cash flow, because they don’t have to distribute all the income generated by their assets every year.

Investment trusts can hold back up to 15% each year, which means they can build up a “rainy day” reserve to bolster dividend payouts in leaner years. In contrast, open-ended funds must return all the income generated each year to investors.

The next generation of investment company dividend heroes

Investment trust

AIC sector

Number of consecutive years dividend increased

Dividend yield (%)

5-year annualised dividend growth rate (%)

Artemis Alpha Trust (LSE:ATS)

UK All Companies

19

1.81

5.03

Murray International (LSE:MYI)

Global Equity Income

19

4.66

2.23

Schroder Oriental Income (LSE:SOI)

Asia Pacific Equity Income

17

4.59

4.00

BlackRock Greater Europe (LSE:BRGE)

Europe

17

1.05

3.26

CQS New City High Yield (LSE:NCYF)

Debt - Loans & Bonds

16

8.86

0.31

Henderson Far East Income (LSE:HFEL)

Asia Pacific Equity Income

16

10.95

2.30

International Public Partnerships (LSE:INPP)

Infrastructure

15

6.50

2.56

abrdn Asian Income Fund (LSE:AAIF)

Asia Pacific Equity Income

15

5.76

5.13

Fidelity Special Values (LSE:FSV)

UK All Companies

14

3.12

11.97

Lowland (LSE:LWI)

UK Equity Income

14

5.39

2.97

Law Debenture Corporation (LSE:LWDB)

UK Equity Income

14

4.09

11.11

Invesco Select Global Equity Income (LSE:IVPG)

Global Equity Income

13

2.69

1.45

TR Property (LSE:TRY)

Property Securities

13

4.90

4.90

Chelverton UK Dividend Trust (LSE:SDV)

UK Equity Income

13

8.94

6.83

Aberforth Smaller Companies (LSE:ASL)

UK Smaller Companies

13

3.04

6.53

Henderson Opportunities (LSE:HOT)

UK All Companies

13

0.70

11.07

Fidelity European Trust (LSE:FEV)

Europe

12

1.99

12.10

North American Income Trust (LSE:NAIT)

North America

12

3.99

7.12

Dunedin Income Growth (LSE:DIG)

UK Equity Income

12

4.75

1.60

Fidelity China Special Situations (LSE:FCSS)

China / Greater China

12

3.29

12.30

CT Global Managed Portfolio Income (LSE:CMPI)

Flexible Investment

12

6.55

4.78

Lindsell Train (LSE:LTI)

Global

12

6.30

19.32

CT Private Equity Trust (LSE:CTPE)

Private Equity

11

5.77

12.91

Mid Wynd International (LSE:MWY)

Global

11

1.02

7.04

Henderson High Income (LSE:HHI)

UK Equity & Bond Income

11

6.74

1.52

CT UK High Income (LSE:CHI)

UK Equity Income

10

6.64

2.46

Mercantile (LSE:MRC)

UK All Companies

10

3.18

6.17

ICG Enterprise Trust (LSE:ICGT)

Private Equity

10

2.57

7.39

Canadian General Investments (LSE:CGI)

North America

10

2.64

4.78

Henderson International Income (LSE:HINT)

Global Equity Income

10

4.64

7.10

RIT Capital Partners (LSE:RCP)

Flexible Investment

10

2.14

2.86

BBGI Global Infrastructure (LSE:BBGI)

Infrastructure

10

6.59

3.27

Greencoat UK Wind (LSE:UKW)

Renewable Energy Infrastructure

10

7.21

8.15

Source: AIC and Morningstar. Investment trusts with the same number of years of consecutive dividend increases are ordered by the date the final dividend was declared. Data as at 12 March 2024.

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