Interactive Investor

Ian Cowie: ‘awesome eight’ income trusts let investors have their cake and eat it

2nd March 2023 10:20

by Ian Cowie from interactive investor

Share on

Our columnist points out that income-seeking investors do not need to sacrifice total returns when sizing up investment trusts with more than half a century of annual pay rises.

Ian Cowie 600

Contrary to what cynics claim, income-seeking investors do not need to sacrifice total returns to sustain rising dividends over 50 years or more.

New analysis of the crème de la crème of income-yielding investment trusts shows how an ‘awesome eight’ have not only increased annual payouts for half a century or more without fail, but seven of them have at least doubled shareholders’ capital over the past decade.

While the past is not necessarily a guide to the future, it is notable that the only trust in this group that fell short of a 100% total return did so by just 1%. Better still for bargain-hunters today, three of them continue to be priced at double-digit discounts to their net asset value (NAV).

JPMorgan Claverhouse (LSE:JCH), launched in 1963, has raised shareholders’ pay every year for the past half-century. This stalwart of the Association of Investment Companies (AIC) ‘UK Equity Income’ sector currently yields 4.76% income, after increasing dividends by an annual average of 4.88% over the past five years. Total returns were 110%, 20% and 4% over the past decade, five years and one-year periods respectively, according to independent statisticians Morningstar. JCH trades at a 5.5% discount to its £492 million assets, with ongoing charges of 0.66% a year.

Brunner (LSE:BUT) Investment Trust, launched in 1927, has boosted dividends for 51 years without fail. Like half the ‘awesome eight’, it is in the AIC ‘Global’ sector. It yields just over 2% income, rising by 5.44% per annum over the past five years. Its total returns over the three periods mentioned above were 193%, 59% - the highest return over five years among our ‘awesome eight’ - and 5.1%. It remains priced 11% below its NAV, with ongoing charges of 0.63%.

F&C Investment Trust (LSE:FCIT), another ‘global’ giant, is the biggest and oldest in this group with total assets of £5.4 billion after being launched in 1868. Its 1.41% dividend yield is rising by 5.38% per annum. Like BUT, it has raised dividends for 51 years and FCIT is also the top-performer over the past decade and one-year periods with total returns of 225%, 57% and 15%. FCIT trades at a modest 1.6% discount to NAV, with charges of 0.54%.

The self-descriptive Global Smaller Companies Trust (LSE:GSCT) has increased dividends for 52 years without fail. Launched in 1889, it currently yields only 1.2% but payouts are rising by 8.48% per annum, the highest growth rate in this group. So if this rate of ascent is maintained - which is not guaranteed - shareholders’ income would double in eight years and six months. Total returns are 130%, 24% and 4.75% with GSCT charging 0.75% and trading at an 11% discount.

Caledonia Investments (LSE:CLDN) has increased dividends for 55 years. This £2.7 billion giant of the ‘Flexible Investments’ sector was launched in 1960 and currently yields 1.83% rising by 3.64% per annum. Total returns are 167%, 50% and 8.6%. CLDN currently trades at a 29% discount - the biggest in the ‘awesome eight’ - and charges 0.84% per annum.

Alliance Trust (LSE:ATST) is a giant of the ‘global’ sector with total assets of £3.3 billion, which has increased shareholders’ pay for 56 years without fail. It currently yields 2.4% rising by 8.33% per annum, the second-highest rate of ascent in this group. Founded in 1888 its total returns over the usual three periods were 193%, 49% and 6.5%. ATST is priced at a 5.9% discount and charges 0.6%.

Bankers (LSE:BNKR) Investment Trust is another giant of the ‘Global’ sector with £1.59 billion assets. Like ATST, it was founded in 1888 and has also raised dividends for 56 years. It currently yields 2.25%, rising by 4.59% per annum. Total returns were 154%, 30% and - the only annual loss among our ‘awesome eight’ of -2.8%. That setback may explain the shares trading at a 8.5% discount. Its ongoing charges are low, at 0.5%.

City of London (LSE:CTY) completes a triumvirate of trusts with 56 consecutive years of dividend increases. Like JCH, this is a giant of the ‘UK Equity Income’ sector. It has total assets of £2.12 billion, after being launched in 1891 and, more recently, delivering total returns of 99%, 32% and 10.7% respectively. Although CTY is the only member of this group trading at a small premium of 1.97% above its NAV, it also delivers the highest yield, with a current payout of 4.68% rising by 3.25%. CTY also has the lowest ongoing costs in this group, charging 0.37% per annum.

It just goes to show that - whatever the cynics may say - these ‘awesome eight’ investment trusts have achieved more than half a century of annual pay rises, plus substantial capital growth, without high costs. So it seems some shareholders really can have their cake and eat it.

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

Related Categories

    Investment TrustsUK shares

Get more news and expert articles direct to your inbox