Three investment companies join the next generation of dividend heroes

Following the announcement of the dividend hero investment companies last week, the Association of Investment Companies (AIC) has released an updated list of the ‘next generation’ of dividend heroes. These are the 27 investment companies that have increased their dividends for 10 or more consecutive years but less than 20.

Three investment companies join the next generation this year, having achieved a decade of consecutive annual dividend increases. The new joiners are: CT Private Equity Trust, Henderson High Income Trust and Mid Wynd International.

BlackRock Smaller Companies leads the next generation of dividend heroes, having increased its dividend for 19 consecutive years¹. It’s closely followed by Henderson Smaller Companies (19), Artemis Alpha Trust (18) and Murray International Trust (18). Three investment companies have 16 years of dividend increases: Henderson Far East Income, BlackRock Greater Europe and Schroder Oriental Income.

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “Investment companies have unique features that make them attractive to income seekers. These include their ability to smooth dividends by holding back up to 15% of the income they receive each year to boost dividends in tough times.

“In difficult markets it’s always reassuring to see the impressive track records of the dividend heroes and next generation of dividend heroes. But it’s important to remember that dividends are never guaranteed.”

The next generation of investment company dividend heroes

Source: theaic.co.uk & Morningstar. Companies with the same number of years of consecutive dividend increases are ordered by the date the final dividend was declared. Data as at 10/03/2023.

Reactions from the three new joiners

David Smith, Manager of Henderson High Income Trust, said: “We are extremely proud to be joining the next generation of dividend heroes.  Although the main objective of the company is to provide shareholders with a high dividend income, we also recognise the importance of dividend growth to our investors, especially in the current inflationary environment.”

Hamish Mair, Fund Manager of CT Private Equity Trust, said: “We are delighted to have been able to maintain impressive dividends over the decade since adopting this policy. It gives our investors some participation in the strong flow of realisations the company receives as well as benefitting from unrealised capital gains. In short, we aim to deliver a handsome yield as well as excellent growth in capital.”

Simon Edelsten, Co-Manager of Mid Wynd International, said: “We are delighted to hear that Mid Wynd has joined the next generation of dividend heroes. While we do not target yield in the fund, and it has only a modest yield, we do believe that growing the dividend progressively shows the health of our selected investments.”

Secrets of success

David Smith, Manager of Henderson High Income Trust, said: “The company’s ability to allocate between equities and bonds has significantly aided its delivery of a high and growing income stream, along with our emphasis on owning good quality companies that not only pay an attractive dividend but also invest sufficiently to support long-term dividend growth. The use of revenue reserves during the pandemic helped us deliver dividend growth to shareholders during a time of extreme stress for income investors, which highlights the attractions of investment trusts.”

Simon Edelsten, Co-Manager of Mid Wynd International, said: “We take dividends seriously and it’s good to see that companies around the world do too. We’re seeing good prospects for dividend growth in lots of places. We like Japanese banks at the moment. We are big fans of automation companies and I think the US’s $2 trillion plans for investment in infrastructure, climate change initiatives and onshore computer chip production will create opportunities too.”

Hamish Mair, Fund Manager of CT Private Equity Trust, said: “The dividend increase directly reflects the growth in NAV and when NAV doesn’t grow, which is rare, we maintain the dividend at the previous level. NAV growth is a direct function of our long-term investment process, which has been refined over more than 20 years.

“We do not invest in a company unless we are sure it can deliver a 25% net internal rate of return (IRR) and do not invest in a fund unless it has the potential to deliver a 20% net IRR. Most, although not all, investments achieve these ambitious targets. To find these investments requires active appraisal of a large pipeline of deals coming from an extensive network spanning the whole European mid-market and beyond. This broad yet ambitious search activity provides a naturally well diversified portfolio, which is the key to maintaining steady growth in NAV and hence dividend. This has worked for over 20 years, and we expect it to deliver for the foreseeable future.”

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Notes to editors

1. Both BlackRock Smaller Companies and Henderson Smaller Companies have raised their dividends for 19 consecutive years. BlackRock Smaller Companies’ year-end is in February and Henderson Smaller Companies’ year-end is in May, meaning that BlackRock Smaller Companies declares its final dividend first.
2. The Association of Investment Companies (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 vision is for closed-ended investment companies to be considered by every investor. The AIC has 349 members and the industry has total assets of approximately £268 billion.
3. For more information about the AIC and investment companies, visit the AIC’s website.
4. 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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