VCT investors benefit from improved dividends

Venture Capital Trusts paid out dividends of more than £240m in the year ending March 2015, analysis from the Association of Investment Companies has revealed.

In the previous year, ending 31 March 2014 VCTs paid out dividends totalling £231.1m.

The AIC said the average VCT paid a yield of 8.2 per cent, with the generalist VCT yielding 8.8 per cent and the AIM VCT yielding 5.6 per cent

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Generalist VCTs focused on private equity and development capital paid the largest percentage of dividends.

The amount of dividends paid by the Alternative Investment Market focused VCT sector in the year to 31 March 2015 was £21.7m slightly less than the £22.7m paid out in the year ending 31 March 2013.

Ian Sayers, chief executive of the AIC, said: “It’s been a good year for the VCT sector, with strong fundraising for the 2014/15 tax year and funds under management at a record high. As the sector has matured, it is encouraging to see so many VCTs offering consistent and attractive yields.

“The companies VCTs invest in start small, and as such are high risk, but the tax advantages on offer can be appealing for investors willing to accept the risks. The increase in average dividends paid is one of many reasons why income hungry investors might want to consider VCTs as part of a balanced portfolio.”

Adviser view:

Andrew Day, principal director of Depledge Strategic Wealth Management in Greater Manchester, said: “We only tend to recommend VCTs to high net-worth investors because even with the tax benefits they are still extremely risky and a specialist investment.”