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Meet the 2019 dividend heroes

14 March 2019

4 minute read

A total of 20 investment trusts have delivered dividend increases for at least the past 20 years, according to the Association of Investment Companies. Here, we reveal the 2019 dividend heroes.

Who's it for? Investors with basic investment knowledge

The value of investments can fall as well as rise and you could get back less than you invest. If you’re not sure about investing, seek professional independent advice.

What you’ll learn:

  • Which investment trusts have the longest track record of raising dividends every year.
  • How there are no guarantees dividend growth will continue for any fund.
  • Why the structure of investment trusts can enable them to offer a growing income stream.

Reliable and sustainable yields are a priority for most income-seeking investors, with investment trusts able to top up dividends during leaner times.

Dividends are payments made by a company to its shareholders out of its post-tax profits. These payments are not fixed and therefore they move up and down like a company's share price. They can be paid once, twice, even four times a year - or a company can choose not to pay a dividend at all.

Here, we look at some of the structural advantages that investment trusts have for income seekers, and some of the “dividend heroes” which have the longest running histories of increasing payouts.

Remember though that there are no guarantees that dividend growth will continue for any investment trust, or indeed for other types of collective investment such as unit trusts, open-ended investment companies (OEICs) or exchange-traded funds (ETFs).

Like the value of the underlying investments that produce them, dividends can fall as well as rise. You could lose money, and past performance is not a reliable guide to what might happen in the future.

Investment trusts and income

Investment trusts often provide a growing income stream because of their ability to hold back income payments while times are good, with managers able to draw on these reserves during more difficult periods.

Open-ended investments, however, such as unit trusts and open-ended investment companies (OIECs) must pass on everything they earn. This means that they cannot smooth out the income payments they deliver, although of course in some years they may offer more income than investment trusts.

There are hundreds of investment trusts for investors to choose from, with dozens that have a long-running history of increasing payouts, according to trade body the Association of Investment Companies (AIC).

2019 dividend heroes revealed

The AIC’s latest list of “dividend heroes” is made up of 20 investment trusts that have raised their dividends every year over the past 20 years.

Four of the investment trusts on the AIC’s latest 2019 dividend heroes list have raised dividends without fail every year for more than 50 years: the City of London Investment Trust, Bankers Investment Trust, Alliance Trust and Caledonia Investments. These trusts have even increased dividends during difficult times such as the 2008 financial crisis, when many companies cut or reduced payouts.

Several others, including BMO Global Smaller Companies, F&C Investment Trust, Brunner Investment Trust, JPMorgan Claverhouse Investment Trust, Murray Income, and Witan Investment Trust, have achieved over 40 years of consecutive dividend increases, although again remember that past performance should not be relied on as a guide to the future.

The F&C Investment Trust is the world’s oldest collective investment trust, having been launched over 150 years ago in 1868. It has total assets of £4 billion in a highly diversified portfolio of investments which includes the shares of well-established companies listed on the world’s major stock markets, companies in developing markets and a small amount of exposure to private equity-backed businesses. Its largest holdings currently include online social media company Facebook, pharmaceutical company Pfizer, and Chinese multinational e-commerce conglomerate Alibaba.

The Scottish Mortgage Investment Trust, currently one of the most popular investment trusts with Smart Investor customers, also invests globally, looking for strong businesses with above-average returns. The trust’s current holdings include multinational technology company Amazon, American automotive and energy company Tesla, American media services giant Netflix, and Italian luxury sports car manufacturer Ferrari.

However, where other people have chosen to invest their money may have limited value in making a decision on the investments that are most suitable for you. This is not a personal recommendation and should not be seen as independent advice.

See below for the AIC’s full list of dividend heroes. If you’re unsure where to invest, seek professional financial advice.

Outlook for dividends

Last year was a record year for dividend payouts, according to the latest UK Dividend Monitor from Link Asset Services, with firms in the UK paying out a record £99.8 billion to shareholders.2

However, much of this growth can be attributed to exchange rate gains among the UK’s biggest companies listed on the FTSE 100. Many of the companies listed on the FTSE 100 receive earnings overseas, which sees their profits rise in value if sterling falls, as it did in 2018 due to Brexit uncertainty. Conversely, profits may fall if sterling strengthens.

If we see an economic downturn in 2019, this will affect company earnings, limiting their ability to maintain the level of dividends currently being paid. Even so, Link Asset Services still expects payouts to break new records in 2019, although it acknowledges that we could see a 10-15% drop in dividends if there is a recession in the next couple of years.2

Even if certain investment trusts or funds have shown strong dividend growth in recent years, this could all change in years to come, and you must be comfortable accepting the risk you could get back less than you put in.

Find out more about the sustainability of dividends

Bear in mind that tax rules might change in future and their effects on you depend on your individual circumstances, which can also change over time. Investments, and the income they provide, can fall as well as rise. You may get back less than you invested.

Past performance is not a reliable indicator of future performance. If you’re unsure where to invest, seek professional financial advice.

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