Which trust has joined the next generation of dividend heroes?

Chris Salih 04/04/2022 in Investment Trusts

The Association of Investment Companies (AIC) published the latest list of 17 dividend heroes last month – investment companies which have consistently increased their annual dividends for at least 20 years in a row.

Seven of the 17 dividend heroes have now increased their dividends for 50 or more consecutive years, including Elite Rated The City of London, with 55 years of dividend rises, and BMO Global Smaller Companies with 51 years.

A further four dividend heroes have increased their dividends each year for between 40 and 49 years and three dividend heroes have increased their dividends consecutively for between 30 and 39 years.

Annabel Brodie-Smith, Communications Director of the AIC, said: “With markets remaining volatile and inflation rising rapidly following the heart-wrenching war in Ukraine, investors are looking for ways to protect their income.

“Investment companies’ ability to hold back up to 15% of the income they receive each year in a revenue reserve gives them an enormous advantage in delivering income to investors. This means investment companies can boost their dividends in years when income would otherwise have fallen short, something investors will be thankful for in these uncertain times.

“It’s a great achievement that we now have seven dividend heroes with at least half a century of unbroken annual dividend increases. These dividend heroes have consistently raised their dividend every year during the inflationary environment of the 1970s and through the market crashes of Black Monday, the tech bust, the financial crisis and the pandemic.”

Sue Noffke, manager of Schroder Income Growth, spoke more about using revenue reserves in this podcast:

Peter Ewins, Manager of BMO Global Smaller Companies Investment Trust, commented: “We know that a lot of our shareholders like the progressive dividend and our aim is to deliver a high total return with capital performance alongside this – smaller company investors are looking for capital growth in the main but if we can also deliver them higher income year by year, then all the better.

“Over time smaller companies listed around the world have become more inclined to pay out more income; as the trust’s portfolio has become more international in recent years, this has helped us deliver the 51 years of consecutive growth.”

Elite Rated dividend heroes*

Investment companyNumber of consecutive years dividend increasedDividend yield (%)
City of London554.97
BMO Global Smaller Companies511.20
Murray Income484.30
Scottish Mortgage395.15
Schroder Income Growth264.35

Next generation also sees Elite Rated newcomers added to list

The AIC’s list of the next generation of dividend heroes also had four newcomers last month – among them Elite Rated Fidelity China Special Situations.

The next generation are the 26 investment companies which have increased their dividends for 10 or more consecutive years but less than 20. Already on the list were Elite Rated Murray International, Schroder Oriental Income, Fidelity Special Values, Lowland and TR Property.

Elite Rated next generation dividend heroes**

Investment companyNumber of consecutive years dividend increasedDividend yield (%)
Murray International164.53
Schroder Oriental Income154.01
Fidelity Special Values122.31
TR Property113.03
Fidelity China Special Situations101.85

Dale Nicholls, manager of Fidelity China Special Situations, said: “It was envisaged that returns for our investors would come from capital growth. But with interest rates being low, the board and I recognise that the dividend has become a more important part of the total return to shareholders. I am therefore delighted the company has been recognised among the next generation of dividend heroes by the AIC.

“It’s been a volatile period for China and the global markets in recent months, but we have seen times like this before, and most likely will see them again. While uncertainty may be with us for some time, the market overall is trading on a price earnings multiple that is attractive relative to history and relative to other stock markets globally. History teaches us that these are usually the periods that offer the most attractive opportunities.

“The growth of the middle class and a refocusing on China’s economy towards domestic consumption will be key drivers of its economy and stock market in the coming years; we therefore focus on those products and services that cater for this growth within China.”

*Source: AIC/Morningstar, 9 March 2022
**Source: AIC/Morningstar 16 March 2022

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