Investment company dividend heroes

Magnificent seven investment companies have raised dividends for 50+ years.

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The Association of Investment Companies (AIC) has published the latest list of 17 dividend heroes, investment companies which have consistently increased their annual dividends for at least 20 years in a row.

Seven of the 17 dividend heroes have now increased their dividends for 50 or more consecutive years. City of London, Bankers and Alliance are out in front with 55 years of dividend rises, followed by Caledonia Investments (54 years), BMO Global Smaller Companies (51) and F&C Investment Trust (51). The latest addition to the over 50 years club is Brunner which announced its 50th year of increased dividends on 16 February.

A further four dividend heroes have increased their dividends each year for between 40 and 49 years and three dividend heroes have increased their dividends consecutively for between 30 and 39 years. A full table of all 17 dividend heroes is below.

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “With markets remaining volatile and inflation rising rapidly following the heart-wrenching war in Ukraine, investors are looking for ways to protect their income. Investment companies’ ability to hold back up to 15% of the income they receive each year in a revenue reserve gives them an enormous advantage in delivering income to investors. This means investment companies can boost their dividends in years when income would otherwise have fallen short, something investors will be thankful for in these uncertain times.

“It’s a great achievement that we now have seven dividend heroes with at least half a century of unbroken annual dividend increases. These dividend heroes have consistently raised their dividend every year during the inflationary environment of the 1970s and through the market crashes of Black Monday, the tech bust, the financial crisis and the pandemic.”

Investment company dividend heroes

Investment company

AIC sector

Number of consecutive years dividend increased

Dividend yield (%)

5-year annualised dividend growth rate (%)

City of London

UK Equity Income

55

4.97

3.74

Bankers

Global

55

2.13

5.06

Alliance Trust

Global

55

2.08

8.33

Caledonia Investments

Flexible Investment

54

1.86

3.64

BMO Global Smaller Companies

Global Smaller Companies

51

1.20

10.34

F&C Investment Trust

Global

51

1.60

5.38

Brunner

Global

50

2.04

4.98

JPMorgan Claverhouse

UK Equity Income

49

4.49

5.81

Murray Income

UK Equity Income

48

4.30

1.36

Scottish American

Global Equity Income

48

2.73

3.21

Witan

Global

47

2.59

8.06

Merchants Trust

UK Equity Income

39

5.15

2.53

Scottish Mortgage

Global

39

0.39

2.93

Value and Indexed Property Income

Property - UK Commercial

34

5.47

3.22

BMO Capital & Income

UK Equity Income

28

3.99

2.41

Schroder Income Growth

UK Equity Income

26

4.35

3.84

Aberdeen Standard Equity Income

UK Equity Income

21

6.29

6.60

Source: AIC/Morningstar. Data at 09 March 2022

Comments from some of the dividend heroes can be found below.

Why does being a dividend hero matter to your shareholders?

Mark Atkinson, Head of Marketing and Investor Relations at Alliance Trust, said: “Those of our shareholders who are looking for income greatly value the confidence they can have in the consistently growing dividends we provide for them. Alliance Trust is a core holding for long-term investors seeking capital growth and rising income. We know our investors have financial goals and rely on their investments to support those goals, whether pension saving, inheritance planning, paying off the mortgage or helping the children buy a home.”

Peter Ewins, Manager of BMO Smaller Companies Investment Trust, said: “We know that a lot of our shareholders like the progressive dividend and our aim is to deliver a high total return with capital performance alongside this – smaller company investors are looking for capital growth in the main but if we can also deliver them higher income year by year, then all the better.”

Matthew Tillett, Lead Portfolio Manager of The Brunner Investment Trust, said: “Being a dividend hero shows that the board has a truly long-term mindset when setting the strategy and long-term objectives of the trust. This should give shareholders who are attracted to the proposition the confidence to invest for the long term.”

How do you manage your portfolio to ensure you keep delivering a year-on-year dividend increase?

Peter Ewins, Manager of BMO Smaller Companies Investment Trust, said: “Our aim is to deliver a high total return for investors from a diversified portfolio of smaller company stocks. We have found that focusing investment on profitable and growth-orientated companies with solid track records and cashflows has over the years fed through a rising income stream from investee company dividends. Over time smaller companies listed around the world have become more inclined to pay out more income; as the trust’s portfolio has become more international in recent years, this has helped us deliver the 51 years of consecutive growth.”

Matthew Tillett, Lead Portfolio Manager of The Brunner Investment Trust, said: “The main and most important way in which we grow the portfolio’s dividend income is by investing in good quality business models that are able to fund their own growth over the long term. In this way we, as shareholders, will benefit from both capital growth and increased dividend income, which can then be paid out to the trust’s shareholders. The second way is through active management in the portfolio. We are valuation disciplined. This means we will often be buying or adding to more lowly valued stocks, whilst selling or reducing those that are more fully valued. The more lowly valued stocks typically have higher dividend yields, although the dividend yield on its own is never a reason for us to transact.”

Mark Atkinson, Head of Marketing and Investor Relations at Alliance Trust, said: “Alliance Trust has nine stock pickers, expert fund managers across the globe offering global diversification within the portfolio, which means the trust can deliver stable returns whatever problems are thrown at the market. This worked through the COVID-19 pandemic and lockdown – and of course, we now see challenges from the tragedies of the war in Ukraine. We will persevere to maintain shareholder confidence investing responsibly, as we always endeavour to do.

“Our stock pickers complement each other perfectly, delivering a portfolio built on their best ideas which while sometimes volatile within each manager’s concentrated core of stocks, when blended together produces smooth returns for investors as the different styles, strategies and stock selections balance out risk. In this way, we secure performance which ensures we can increase the dividend year on year.”

How does the investment company structure help you produce consistent income growth?

Matthew Tillett, Lead Portfolio Manager of The Brunner Investment Trust, said: “The investment company structure is very important because it gives the board some discretion over how much of the trust’s earnings in any given year are paid out to shareholders. In normal years when the economy is growing, the board would typically opt to hold back a small portion of the earnings, adding them to the company’s reserves, which can then be drawn down in more difficult years. In this way, the dividend paid to shareholders can continue to grow, even during tough economic times. Open-ended fund structures are not able to do this and therefore tend to exhibit more volatile dividend payments.”

Mark Atkinson, Head of Marketing and Investor Relations at Alliance Trust, said: “One of the benefits of investment trusts is that they can save up to 15% of income each year, which can be used to smooth over payments when markets have threatened to impact performance. This has of course helped Alliance Trust offer consistent dividend growth going back each year for the past 55 years. Because Alliance Trust has revenue reserves of £3,242m, boosted significantly last year when it was approved that the trust could convert its £645m merger reserve into a distributable reserve, this means the board, which decides the level of dividend, has great flexibility as regards future dividends and it supports the trust’s objective of paying a rising dividend.”

Peter Ewins, Manager of BMO Smaller Companies Investment Trust, said: “Whilst there have been bouts of volatility and economic shocks, for example the recent pandemic, which has caused a reduction in our income, as an investment trust we have been able to make use of the company’s revenue reserves to maintain progression in our own dividend payment, something open-ended vehicles cannot do.”

 

-ENDS-

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Notes to editors

  1. The Association of Investment Companies (AIC) was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed-ended investment companies, incorporating investment trusts and other closed-ended investment companies and VCTs. The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help members add value for shareholders over the longer term. The AIC has 360 members and the industry has total assets of approximately £265 billion.
  2. Disclaimer: The information contained in this press release does not constitute investment advice or personal recommendation and it is not an invitation or inducement to engage in investment activity. You should seek independent financial and, if appropriate, legal advice as to the suitability of any investment decision. Past performance is not a guide to future performance. The value of investment company shares, and the income from them, can fall as well as rise. You may not get back the full amount invested and, in some cases, nothing at all.
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