Trust dividend ‘heroes’ save the day with increases

Trust dividend ‘heroes’ save the day with increases

Long running success stories of the investment trust world are once again reporting increased dividends after decades of rises.

Companies that have increased their dividends each year for at least 20 years earn the Association of Investment Companies moniker ‘dividend heroes’.

Bankers Investment Trust became one of the first heroes of 2016 as it announced its 49th year of consecutive dividend increases.

Article continues after advert

The trust, run by Henderson, was joined by Alliance Trust which also reached 49 years of consecutive dividend increases.

They are respectively the second and third investment trusts to reach this milestone, according to the AIC.

But they could both be beaten by City of London Investment Trust which could reach 50 years of dividend increases during 2016.

Annabel Brodie-Smith, communications director at the AIC, said: “After a bumpy start to the year, with some well-known companies cutting their dividends, it’s reassuring for investors that some investment companies have an unrivalled record of dividend increases.

“Many investment companies have been able to increase their dividends every year because they have the unique ability to squirrel away some of the income they receive each year for bad times ahead.

“So it is not surprising that some investors may want to consider investment companies for their Isas or pensions.”

Brunner Investment Trust is another which has already announced an increased dividend - for the 44th year running.

Final results are due this month from Foreign & Colonial Investment Trust, which will reach 45 years if it announces another dividend increase.

Alex Crooke, manager of Bankers Investment Trust, said: “Overall we are positive on the prospects for dividend growth in the year ahead, though sectors sensitive to falling commodity prices are likely to cut pay-outs to shareholders.

“Consequently, stock picking is vital in these market conditions so that income investors can avoid those stocks likely to produce poor shareholder returns.

“It remains possible to find companies in all regions that are expected to raise their dividends by around 5 to 6 per cent but as always, it is essential not to overpay for this income.”

Adviser view

Marvin Evans, principal at Gloucestershire-based Old Bank Wealth Management, said: “In terms of confidence, if you are putting together a portfolio with investment trusts performance is a factor but if there is a track record it gives your clients confidence.

“I am open to investment trusts if someone can show me there is not too much gearing and they have got the performance.”