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18 February 2019

UK Equity Income investment companies deliver 4.5% annual dividend growth and treble investors’ capital over 20 years.

Investment companies in the UK Equity Income sector have delivered compelling returns for investors seeking both income and capital growth, new research from the Association of Investment Companies (AIC) has revealed.

Over the past 20 years, the average UK Equity Income investment company generated annual dividend growth of 4.5%, far outstripping annualised inflation of 2.8% over the same period. As well as delivering inflation-busting income, investment companies in the UK Equity Income sector have more than trebled investors’ initial investment, delivering a 252% capital return.

The data shows that £100,000 invested in the average UK Equity Income investment company in 1998 would have generated income of £3,025 over the following year. Income payments would have risen to £7,036 in 2018, totalling £98,005 in income payments over 20 years. In addition to this income, the investor’s initial £100,000 investment would be worth £352,281 by 31 December 2018.

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “The UK Equity Income investment company sector over the past 20 years has not only provided investors with a growing, inflation-busting income but has more than trebled investors’ capital investment after all the income has been taken.

“The dividends from the UK Equity Income sector have grown steadily over the past 20 years because investment companies have a structural advantage when it comes to generating income. They are able to retain some of the income they receive from their investments every year and use it to boost their dividends when times are tough which helps them maintain income growth. Whilst continuing to receive this income, investors would have seen the capital value of UK Equity Income companies fluctuate. Market movements such as the global financial crisis in 2008 have a severe short-term impact but over 20 years investors’ capital would have more than trebled.”

 

 

£100,000 invested in the average UK Equity Income investment company on 31 December 1998

 

Capital value if
all income taken
(£)

Income
received (£)

31-Dec-99

113,280

3,025

31-Dec-00

118,011

3,178

31-Dec-01

109,218

3,291

31-Dec-02

83,600

3,402

31-Dec-03

101,908

3,504

31-Dec-04

119,940

3,626

31-Dec-05

147,213

3,814

31-Dec-06

178,318

4,436

31-Dec-07

170,898

4,734

31-Dec-08

125,879

4,984

31-Dec-09

157,435

5,265

31-Dec-10

197,049

5,258

31-Dec-11

201,363

5,550

31-Dec-12

234,316

5,672

31-Dec-13

301,286

5,856

31-Dec-14

314,005

6,041

31-Dec-15

327,046

6,239

31-Dec-16

349,734

6,441

31-Dec-17

386,930

6,653

31-Dec-18

352,281

7,036

Source: AIC

-Ends-

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Notes

  1. 4.54% is the compound average dividend growth rate from 31 December 1998 to 31 December 2018 of all AIC UK Equity Income members in the current AIC universe with a 20-year history. Source: AIC.
  2. 2.80% is the annualised UK RPI from 1 January 1999 to 31 December 2018. Source: Morningstar.
  3. Annualised UK CPI from 1 January 1999 to 31 December 2018 was 2.02%. Source: Morningstar.
  4. 252% is the share price capital return from 31 December 1998 to 31 December 2018 of all AIC UK Equity Income members in the current AIC universe with a 20-year history. Source: AIC.
  5. 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 354 members and the industry has total assets of approximately £178 billion.
  6. 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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