Investment Trusts Raising Dividends

THE INCOME INVESTOR: A quarter of investment trusts have increased their dividend payments every year for the past decade, helping investors beat inflation

Emma Wall 4 March, 2014 | 2:37PM
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Investors looking for a sustainable – and rising – income should consider some of the golden oldie investment trusts.

These closed-end funds have managed to successfully outperform over decades, and reward investors with ever-increasing dividend payments.

Foreign & Colonial Investment Trust (FRCL) today announced its 43rd consecutive dividend increase, matching the Brunner Investment Trust (BUT) which last week confirmed its 43rd dividend increase.

Brunner is Bronze rated by Morningstar analysts, who say the changes in the management team made in 2012 are now bearing fruit. As well as a growing income, the global equity fund has grown in value significantly over the past three years.

The record for the longest consecutive rise in dividend payments however goes to City of London Investment Trust (CTY) and Bankers Investment Trust (BNKR) which have both raised their dividends for an incredible 47 years in a row.

City is a Gold Rated trust and invests predominantly in large UK companies. Manager Job Curtis is well-respected by analysts who praise his consistent and measured approach. Curtis has run the trust for more than two decades and managed to smooth volatility in the depths of the credit crisis when many other trusts faltered.

Bankers Trust is rated Silver by Morningstar analysts, and invests in global equities with a bias towards domestic UK stocks. The fund has returned xx to shareholders over the past year and has a simple and very competitive fee structure. Not to mention that growing dividend for nearly five decades.

It is partly the structure of investment trusts that enable their managers to continue rewarding shareholders in this way. Trust managers can hold cash reserves back in the good times to top up dividends when a bull market slows. In this way, they are ideal for investors looking for a long-term buy-and-hold approach.

Annabel Brodie-Smith, of the Association of Investment Companies said with interest rates still at record lows, investment companies’ ability to consecutively increase dividends has become an increasingly appreciated feature of investment trusts.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Bankers Ord112.60 GBX1.26Rating
Brunner Ord1,315.00 GBX0.38Rating
City of London Ord415.95 GBX0.59Rating
F&C Investment Trust Ord1,014.00 GBX0.80Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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