Dividend heroes revealed: Investment trusts with at least 20 years of raising payouts – and three have topped up for 52 years
Three investment trusts have dividend-raising runs dating back to 1967, when Mick Jagger and Keith Richards of the Rolling Stones were arrested for drugs
Four dividend hero investment trusts have now raised their payouts for 50 years in a row.
The latest dividend heroes list, highlighting those investment trusts with at least a 20-year history of consecutive payment increases was revealed by the Association of Investment Companies today.
The trio with the longest history of increasing dividend payments year-in, year-out, City of London, Bankers and Alliance Trust, have racked up an astonishing 52 years of rises.
Those rises date all the way back to 1967, when General de Gaulle vetoed the UK’s entry to join the EC for the second time.
That was also the year when Celtic became the first British team to win the European Cup, and Mick Jagger and Keith Richards were arrested for possession of drugs after police raided the Rolling Stone guitarist’s house.
In 1967, the pound was famously devalued, leading to Prime Minister Harold Wilson’s controversial broadcast to the nation stating: ‘It does not man that the pound here in Britain, in your pocket or purse, or in your bank has been devalued.’
In a sign of the times for those of us living in modern-day Britain – where £1 buys $1.32 – the devaluation in 1967 was from £1 being worth $2.80 to $2.40.
While a long history of raising payouts unites them, investment strategies among the dividend heroes are diverse.
Investors get payouts from steady income-focussed trusts, such as City of London, which yields 4.53 per cent and from those mixing income and growth around the world, such as Witan with its 2.5 per cent yield and 44 years of raising payouts.
However, among the names on the list is even growth-focussed giant Scottish Mortgage, which invests in the world’s most exciting companies, such as Tesla, Amazon and Chinese tech star Alibaba, and yields just 0.62 per cent, but has raised payouts for 36 years.
|Company||AIC sector||Number of consecutive years dividend increased||Dividend yield at 28/02/19 (%)|
|City of London||UK Equity Income||52||4.53|
|BMO Global Smaller Companies||Global||48||1.15|
|F&C Investment Trust||Global||48||1.63|
|JPMorgan Claverhouse||UK Equity Income||46||3.92|
|Murray Income||UK Equity Income||45||4.38|
|Scottish American||Global Equity Income||39||3.1|
|Merchants||UK Equity Income||36||5.41|
|Scottish Investment Trust||Global||35||2.67|
|Temple Bar||UK Equity Income||35||3.38|
|Value and Income||UK Equity Income||31||4.54|
|BMO Capital & Income||UK Equity Income||25||3.68|
|British & American||UK Equity Income||23||18.14|
|Schroder Income Growth||UK Equity Income||23||4.31|
|Invesco Income Growth||UK Equity Income||21||4.38|
|Source: Association of Investment Companies March 2019|
The key to the dividend heroes’ long runs lies in investment trusts’ ability to hold back some of the income they receive in good years to help supplement any shortfalls in leaner times.
The AIC website shows revenue reserves, along with how many years the current revenue reserve can pay the investment company’s last full financial year of dividends, allowing investors to check on how strong a trust’s back-up is.
‘This has enabled the 20 dividend heroes to achieve their enviable records of dividend growth, raising dividends for more than 20 years.
‘With interest rates still low, the ability of investment companies to pay dependable and rising dividends is as important as ever.’
How a dividend hero invests
Job Curtis has been the manager of City of London investment trust since 1991
City of London investment trust sits at the top of the dividend hero pile, with 52 years of raising payouts in a row.
The trust is low cost, with ongoing charges of just 0.41 per cent, and invests predominantly in UK companies, which make up 89.6 per cent of its holdings.
Three quarters of the shares it holds are in FTSE 100 companies, while just under 13 per cent are in the FTSE 250 index, made up of medium-sized companies.
International shares amount to 9.4 per cent of the portfolio.
Among City of London’s top ten holdings are the UK’s dividend big hitters Shell, HSBC and BP, while Prudential and Lloyds Banking Group also feature.
City of London currently has a dividend yield of 4.53 per cent, compared to the FTSE All Share index’s 4.29 per cent.
Over one year the trust has a total return of 3.3 per cent, over three years it is 31.1 per cent and over five years 32 per cent. That compares to the FTSE All Share’s 1.7 per cent, 30.4 per cent and 27.6 per cent, respectively.
City of London’s factsheet illustrates the last 20 years of dividend increases
Job Curtis, who has managed City of London since 1991, says: ‘At the core of City of London’s portfolio are companies that can consistently grow their profits and dividends.
‘I also like a relatively diversified portfolio across companies and sectors to benefit from different stages of the economic cycle and to reduce risk. Even the very largest companies can have sudden severe problems, such as when BP had to stop paying a dividend after the Macondo oil disaster in 2010.
‘In the 27 years that I have been City of London’s fund manager, we have used the revenue reserves seven times. The investment trust structure undoubtedly has significant advantages in providing investors with consistent growth in income.’