FundCalibre’s dividend growth champions

Dividend growth has been a sideline for investors in recent years, who have been far more interested in the astonishing capital growth on offer from, say, AI, India or digitisation. However, there are reasons to make it a priority: not only does it impose good capital discipline on companies, but it can also be a way to target income while avoiding companies in distress and be a useful tool to ensure income grows in line with inflation over time. 

It also looks well valued. Dividend growth has been overlooked at a time when investor focus has been on the US technology sector. However, as market leadership broadens, receiving a portion of overall returns as a dividend may start to have more appeal.  

With that in mind, FundCalibre has looked at those funds on our Rated list that have grown their payouts consistently over the past five and ten years. 

Funds with the highest dividend growth over 10 years

There is no single sector that stands out. Among the 10-year winners, three are global dividend funds – M&G Global Dividend, Fidelity Global Dividend and Guinness Global Equity Income; four are UK dividend funds, including WS Lindsell Train UK Equity, which is top, with 110% growth over the decade; one is an Asian Income fund – Schroder Oriental Income. Then there is a property fund – TR Property.

TR Property is notable given the relative difficulty property has faced in recent years in a world of higher interest rates. However, its dividend performance is a reminder of how this asset class can provide very reliable dividend growth even if capital performance is more volatile. 

City of London Investment Trust is well known for its exceptional long-term dividend track record and has consistently raised its dividend for 58 consecutive years**, so it’s no surprise to see it on this list. Schroder Income Growth is another AIC dividend hero with 29 years of consecutive dividend growth**.

Funds with the highest dividend growth over 5 years

M&G Global Dividend makes it into the top of both lists. That’s not surprising for a fund whose mantra which is all about dividend growth. The fund continues to deliver what it promised and its annual dividend last year was over 3.5 times the dividend it achieved in 2009***. The fund never has the highest headline yield but it compensates for this by growing the dividend. Fidelity Global Dividend and Royal London Corporate Bond are also in both the 5 and 10-year lists. 

The other seven include two Asian Income funds from Jupiter and Schroders, plus Montanaro European Income, M&G North American Dividend and UK-focused Schroder Income.

The question for investors is whether these champions can sustain their track record. For bond managers it is trickier. Corporate bond spreads over treasuries have ticked marginally higher in recent weeks, but still remain low relative to history. For bond manager income growth has been helped the past  5 years by a rise in interest rates and yields. The same dividend growth going forward won’t be sustainable unless interest rates continue to rise further. 

The Royal London Corporate Bond fund faces this challenge, but managers Shalin Shah and Matthew Franklin have shown themselves adept at dealing with a variety of conditions. 

When it comes to equity income, investors have an abundance of choice. Many more companies have started paying dividends – from Alibaba and Tencent in China to the technology giants in the US – which has widened the opportunity set. Across Asia, corporate governance reforms have driven higher dividend payouts. 

The Schroder Asian Income fund is an interesting choice. Run by Richard Sennitt, it currently has a yield of 4.2%****, but has also outpaced the IA Pacific ex Japan sector. It is well-diversified across countries and sectors, but has 25.5% in technology^. It has 56% in emerging Asia, including 17.5% in China^, so would be exposed to any recovery there.

The Global Equity income sector remains one of the most reliable sectors for long-term dividend growth. JPM Global Equity Income and M&G Global Dividend have delivered excellent dividend growth in the past five years. They are a good reminder that a lower starting yield and strong dividend growth often beats a high starting yield which stays static or goes backwards. 

Another option would be the Montanaro European Income fund. Europe is proving a popular destination for investors coming out of the US. Eventually, this may filter down to the cheap and unloved smaller companies sector, where the Montanaro fund plies its trade. Manager Alex Magni already sees a change in attitude: “With improving earnings growth and compelling valuations, 2025 could be the year small-caps shine once again.”

These dividend growth champions have served investors very well over the past five and 10 years. All of the funds have a disciplined, repeatable process that should give them an edge into the future. 

*Source: FE Analytics, at 24 March 2025

**Source: AIC, Dividend heros 2025

***Source: FE Analytics, dividend history to 2 January 2025

****Source: FE fundinfo, at 24 March 2025

^Source: fund factsheet, 28 February 2025