30 investment trusts make up next generation of dividend heroes

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “There are 30 investment trusts that make up our next generation of dividend heroes, having consistently increased their dividends for more than ten years but less than 20. Over half of these next generation trusts yield more than 4%. They cover a wide range of sectors from equities to debt, infrastructure and property. New members of the club are Patria Private Equity and Foresight Solar Fund, both celebrating their tenth annual dividend increase – a notable achievement over a turbulent time for markets.

“Investment trusts have many advantages for income seekers. They are able to smooth dividends over time because they can hold back income from their portfolio and use this to boost dividends in leaner years. Investment trusts can also pay income out of their capital profits and their structure is particularly suitable for high yielding hard-to-sell assets such as infrastructure and property.”

The next generation of investment trust dividend heroes

^{Source: theaic.co.uk / Morningstar. Data as at 20/03/2025. *A merger between Henderson International Income and JPMorgan Global Growth & Income has been proposed. **A cash offer for BBGI Global Infrastructure S.A has been proposed.}

Comments from the new joiners

Alan Gauld, Senior Investment Director and Lead Fund Manager, Patria Private Equity Trust, said: “We are delighted that Patria Private Equity Trust (PPET) has made it into the next generation of dividend heroes! Historically, there has been a debate over whether private equity trusts should be purely about capital growth or not. However, the board of PPET has consistently prioritised returning cash to shareholders, effectively an ongoing return of capital at NAV, over the long term. We feel it’s a feature that is attractive to many investors, particularly retail, and believe that having a consistent dividend policy has helped build trust with PPET’s shareholders.

“PPET has a focused investment strategy of partnering with a small group of leading mid-market private equity managers, through private equity funds and also by directly investing into private companies alongside these managers. However, at an underlying company level, PPET’s portfolio is well diversified and generates a consistent cash yield, usually around 20% of opening NAV per year. As such, this allows PPET to comfortably support a growing dividend. The board’s strategy in recent times has been to at least maintain the value of the dividend in real terms. This has resulted in 5% growth in dividend in 2024, and 11% growth in 2023.”

Ross Driver, Managing Director at Foresight Group and Lead Fund Manager for Foresight Solar Fund, said: “Foresight Solar listed in 2013 to provide investors access to renewable infrastructure assets, specifically solar farms, and deliver steady, progressive income. In the last 11 years, we’ve built an experienced team to oversee an excellent portfolio that reliably generates cash. We’re proud to have made every dividend payment and to have increased our payout every year. In that time, our dividend has grown 35% – including the 2025 target. Being included in the select group of trusts that have such a positive track record of consistently delivering for their shareholders is great recognition of our commitment.

“Our operational portfolio will continue to produce steady, reliable income from the sale of electricity to the grid. We have a dedicated team to monitor and manage our solar farm assets and ensure they’re producing in the most efficient way. That’s the core of our investment proposition, but our strategy has evolved to adjust to the new post-pandemic reality of higher interest rates. To amplify returns, we’re building a development pipeline of solar and battery storage projects that allows us to deliver an additional element of growth on top of the regular income provided by the operational portfolio – improving performance over time.”

Views from long-standing next generation trusts

John Spedding, Head of Investment Trusts at Schroders, which manages Schroder Oriental Income, said: “Achieving AIC next generation dividend hero status is important for both the company and its shareholders because it demonstrates a strong commitment to consistent and growing dividend payments and signals that the company is focused on delivering long-term value through sustainable income and strong performance.”

Richard Sennitt, Manager of Schroder Oriental Income, said: “The board determines the dividend policy and the absolute level of any dividend paid by the trust. Historically, the level of dividend paid in any year has been a reflection of the dividends paid by the underlying stocks in the portfolio over time rather than any decision to pay out of capital which has become more common in recent times. One of the benefits of the investment trust structure is the ability to use revenue reserves accumulated during good times to help smooth dividend payments when things get tough, as they did during Covid. Schroder Oriental Income’s substantial revenue reserve enabled the trust to continue to grow its dividend during that period despite the market travails.

“The underlying portfolio’s dividend growth over the medium term will tend to be driven by the earnings growth of the stocks held. Where earnings go dividends tend to follow, with the level of sterling versus Asian currencies also having an impact. Whilst we look to own stocks that have a strong income rationale for going into the portfolio this does not mean that we purely focus on the highest yielding names. We also look for names that have the potential for upside from a capital perspective.”

Stefan Gries, Co-Manager of BlackRock Greater Europe Investment Trust, said: “While the aim of the BlackRock Greater Europe Investment Trust is primarily to achieve capital growth, we appreciate that a good and growing income is important to our shareholders, particularly following a period of higher inflation. Investment trusts have significant advantages when it comes to paying a regular income to shareholders, and we are pleased to have our strong dividend track record recognised.

“The company’s dividend growth in recent years has been a byproduct of our focus on truly exceptional companies in Europe, which offer predictable earnings and cash flows. We look for businesses led by strong and experienced management teams, with a unique aspect that protects the company from competition. This provides them with superior pricing power and growing market share, which should lead to greater capacity to pay rising dividends over time.”

Opportunities in Europe and Asia Pacific for income investors

Stefan Gries, Co-Manager of BlackRock Greater Europe Investment Trust, said: “Whether for capital growth or income seekers, the outlook for Europe is brighter than it has been for some time. Europe is home to globally leading companies that dominate their respective sectors, and valuations are attractive. These tailwinds mean companies in Europe should be well placed to increase payouts in the years ahead. With many investors having been overweight the US market for some time, Europe is poised to benefit as sentiment improves on the back of increased defence and infrastructure spending in Europe, the potential for China to stabilise and possible peace negotiations in Ukraine.”

Richard Sennitt, Manager of Schroder Oriental Income, said: “We believe that Asia remains an attractive source of income for UK investors. The region provides a source of diversification away from the UK to a well diversified set of income-generating assets in one of the fastest growing regions globally. Approximately 45 stocks contribute to around 50% of the income generated from the region, compared to around ten names in the UK. This diversification reduces the reliance on a limited number of entities for income generation, providing an active manager like us with greater options. Although the economic outlook remains uncertain, especially from a Trump policy perspective, payout ratios are reasonable and leverage ratios for Asia are relatively low when compared to other regions. This should provide some resilience for dividend payments if things were to slow down.”

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