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Investment company inflation busters

30 January 2018

UK Equity Income sector delivers 4.6% annual dividend growth and doubles capital value over 20 years.

Latest research from the Association of Investment Companies (AIC) into the performance of the UK Equity Income sector makes compelling reading for income-seeking investors in retirement who also want to build up a lump sum to potentially pass on to family. The data highlights the benefits of investment companies for long-term investors who want to achieve both capital growth and take an income.

Data from Morningstar shows that £100,000 invested in the average UK Equity Income investment company on 31 December 1997 would have generated an initial income of £3,831 in 1998 and then has grown every year to £8,951 in 2017. Over 20 years to 31 December 2017, the investor would have received a total of £125,122 in dividend payments. Over this time frame the average annual dividend growth was 4.6%, notably higher than the annualised RPI inflation figure of 2.8%.

Income received each year on £100,000 invested in average UK Equity Income investment company

Assuming the income generated was taken by the investor, the capital value of the £100,000 investment would have doubled to £200,744.

Capital growth of £100,000 portfolio invested in average UK Equity Income investment company (if all income taken)

Commenting on this data, Annabel Brodie-Smith, Communications Director of the Association of Investment Companies said: “The UK Equity Income investment company sector has not only provided investors with reliable, inflation busting income over 20 years, but also doubled the capital investment after all the income has been taken.

“Investment companies have significant structural advantages for income-seeking investors and their ability to squirrel away some of the income received each year to distribute in tougher times is a major benefit. For those investors who are prepared to take the risks, these figures make a compelling case for investment companies to be considered as part of a long-term income portfolio.”

£100,000 invested in the average UK Equity Income investment company at 31 December 1997 over 20 years

 

Capital value (£)

Income received (£)

31-Dec-98

105,716

3,831

31-Dec-99

109,327

4,043

31-Dec-00

114,837

4,245

31-Dec-01

117,216

4,422

31-Dec-02

91,163

4,578

31-Dec-03

104,657

4,779

31-Dec-04

121,839

4,825

31-Dec-05

143,803

5,115

31-Dec-06

172,270

5,570

31-Dec-07

145,817

6,336

31-Dec-08

86,982

6,874

31-Dec-09

108,114

6,912

31-Dec-10

128,892

7,043

31-Dec-11

125,198

7,212

31-Dec-12

140,919

7,594

31-Dec-13

177,153

7,864

31-Dec-14

174,461

7,990

31-Dec-15

176,666

8,423

31-Dec-16

182,972

8,516

31-Dec-17

200,744

8,951

Source: AIC using Morningstar. Includes all UK Equity Income members in the current universe with a 20-year history

For more information on how investment companies can help deliver a higher income, view the AIC’s guide: Looking for a little bit more?

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Notes

  1. Data is to 31 December 2017 based on the last official close price at the month end, on a % share price total return basis. No expenses taken into account. Source: AIC using Morningstar.
  2. 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 347 members and the industry has total assets of approximately £174 billion.
  3. 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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Media enquiries

Annabel Brodie-Smith
Communications Director
Tel: 020 7282 5580
annabel.brodie-smith@theaic.co.uk
@annabelbrodies
@aicpress

Elmley de la Cour
Communications Manager
Tel: 020 7282 5583
elmley.delacour@theaic.co.uk
@aicpress