Eight trusts have joined the next generation of the Association of Investment Companies’ (AIC) dividend heroes after delivering a decade of income growth.

AIC ‘dividend heroes’ are those trusts that have delivered 20 years or more of consecutive dividend growth and 20 portfolios currently hold the accolade.

However, 33 investment trusts have increased their dividends in consecutive years for at least a decade, but fewer than 20 years, which the AIC calls the ‘next generation of dividend heroes’.

Coming from a wide range of sectors, including private equity, the new joiners are CT UK High Income (CHI ), Mercantile (MRC ), ICG Enterprise (ICGT ), Canadian General Investments (CGI ), Henderson International Income (HINT ), RIT Capital Partners (RCP ), BBGI Global Infrastructure (BBGI ), and Greencoat UK Wind (UKW ).

The AIC’s communications director Annabel Brodie-Smith pointed out the importance of dividend growth to investors, particuarly as inflation threatens to erode the value of static payouts, adding that trusts’ ability to smooth dividends over time makes them particularly attractive to income seekers.

They can do this because they are allowed to hold back up to 15% of their income each year, which they can use to boost payouts in leaner years.

‘Their ability to keep growing dividends through challenging times is reassuring – those investors should remember that dividends are never guaranteed,’ she said.

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Trust	AIC sector	Consecutive yrs dividend increases	Dividend yield	5-yr annualised dividend growth
CT UK High Income	UK Equity Income	10	6.64%	2.46%
Mercantile	UK All Companies	10	3.18%	6.17%
ICG Enterprise	Private Equity	10	2.57%	7.39%
Canadian General Investments	North America	10	2.64%	4.78%
Henderson International Income	Global Equity Income	10	4.64%	7.10%
RIT Capital Partners	Flexible Investment	10	2.14%	2.86%
BBGI Global Infrastructure	Infrastructure	10	6.59%	3.27%
Greencoat UK Wind	Renewable Energy Infrastructure	10	7.21%	8.15%

Source: AIC

From wind to private equity

The largest fund joining the ‘next generation’ list is Greencoat UK Wind, a £3.1bn portfolio of onshore and offshore wind assets managed by Greencoat Capital’s Stephen Lilley.

‘Since our initial public offer 11 years ago, we have increased our dividend every year at least in line with retail price index (RPI) and with the final dividend of the year, our investors will have received over £1bn,’ he said.

He said the fund is now delivering net returns to investors of 10% on net asset value (NAV), and that he and co-manager Matt Ridley remained committed to continuing to growing the dividend.

The next largest is the £1.7bn UK mid and small-cap equity Mercantile trust, which is run by Guy Anderson.

‘With an improving domestic economic backdrop, low valuations and strong performing portfolio companies, we are finding many exciting investment opportunities across the UK mid and small-cap spectrum, as demonstrated by Mercantile’s elevated level of gearing, at around 15%,’ he said.

‘Hero’ promotion incoming

Ready for promotion to the ‘dividend hero’ list is Artemis Alpha (ATS ), which has delivered 19 years of consecutive dividend growth. The £3.4bn UK equity trust has a dividend yield of 1.8% and a five-year annualised dividend growth rate of 5.03%.

Outgoing Bruce Stout’s Murray International (MYI ) also has 19 years of dividend increases behind it, with the £1.5bn global equity income trust offering investors a dividend yield of 4.66% and over five years an annual dividend growth rate of 2.23%.

Dividend heroes 

The 20-strong list of dividend heroes mostly features equity income trusts, with Value and Indexed Property Income (VIP ) the sole alternative fund.

Janus Henderson’s UK equity income trust City of London (CTY ), Allianz’s global income trust Brunner (BUT ) and multi-manager Alliance (ATST ) top the table, with 57% years of consecutive dividend growth.

‘Despite a tricky few years for the dividend heroes, ten investment trusts now have at least half a century of consecutive annual dividend increases. They have continued to raise their payouts through the high inflation of the 1970s, recession of the 1990s, the global financial crisis in 2008 and the pandemic – showing their remarkable resilience,’ Brodie-Smith said.