3 Trusts that have Grown Dividends for Decades

Looking for income-paying investments for your retirement portfolio? Morningstar senior fund analyst David Holder picks three closed-end funds which are dividend heros

Emma Wall 9 October, 2015 | 8:30AM
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This article is part of Morningstar’s Guide to Income Investing. Whether you are looking grow your pension pot, or invest for retirement income, this week we have all the news, information and education you need.


Emma Wall: Hello and welcome to the Morningstar series, "Ask the Expert." I'm Emma Wall and I'm joined today by David Holder, Senior Fund Analyst for Morningstar.

Hi, David.

David Holder: Hello Emma.

Wall: So, all this week we've been focused on everything income, income investing and today we're going to have a look at those dividend heroes, those investment trusts that have managed to grow their dividend over a significant period of time, decades of time. What's the first trust you'd like to highlight today?

Holder: Well, the first trust is Witan Investment Trust (WTAN). This is a globally diversified portfolio. It has around 400 holdings. It's really looking to provide investors with capital, long-term capital growth and growth in the dividends that they'll receive also.

Talking about longevity of dividends, this trust has paid an increasing level of dividends over 40 consecutive years and so, incredibly impressive from that regard. It also has dividend reserves over a couple of years also which allows the fund manager to smooth the level of dividends that investors that investors receive.

Wall: And because it's so diversified with over 400 holdings it's quite a steady-eddie. It's the sort of thing that will be suitable for a core of a portfolio?

Holder: We believe so, yes. It's very prudently and sensibly managed by Andrew Bell and James Hart, both long-standing and well-regarded investors. It invests through segregated portfolios in specialist areas. And so, yes, indeed, we think it is a really well-diversified portfolio managed very sensibly and provides investors with really good building block for their portfolio.

Wall: Quite a low yield though, isn't it?

Holder: Yeah, it is. It's not a yield – a lower yielding than some other investments out there, 2.2% that is paid quarterly also. But I think it's important to incorporate differing levels of income and diversification of income rather within investors' portfolios.

Wall: Absolutely. What's the second trust today?

Holder: The second trust is Lowland (LWI). Lowland focuses very much on U.K. equities. It is managed by their very experienced James Henderson who has managed Lowland since 1990. This has a focus on smaller and mid-cap U.K. companies. It has an element of gearing also and so, therefore, it's slightly higher risk than a standard U.K. equity fund, if you like. Henderson are very well-regarded fund management house. They are very well-resourced also. So, we feel very comfortable with the Henderson proposition within the U.K.

The trust is providing a dividend of around 3%, paid quarterly again. It's covered by some decent reserves also and has increased every year since 1972 with the exception of 2009 when it was merely maintained and so, again, a very long record of rising dividend income for investors.

Wall: No mean feat over cycles of rallying and indeed bear markets?

Holder: Absolutely, and it really plays into the strength of the investment trust structure as well.

Wall: What's the third and final trust?

Holder: The final trust I'd like to highlight Emma is Murray International (MYI). As the name suggests, it's a global investment trust managed by Bruce Stout of Aberdeen. We regard the Aberdeen process very highly and I think it's very well applied to the income space also. Bruce has managed the trust since 2004. It does have a slightly higher risk profile in that it's investing quite materially in Latin America or emerging markets in Asia.

And so, we think that over time investors will be rewarded for this exposure to slightly more exotic markets; however, it should be made clear that there is some volatility here and that investors should be prepared to invest for the longer-term and that this isn't necessarily a core part of investors' overall sort of portfolio.

Wall: What's the yield on that trust?

Holder: The trust pays a very healthy dividend yield of 5.4%, again paid quarterly, which I think is very important for investors.

Wall: So, you've got three very different but very well-regarded trusts there?

Holder: Yes, I think all three can play a part within investors' portfolios.

Wall: David, thank you very much.

Holder: Thank you, Emma.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

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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Emma Wall  is former Senior International Editor for Morningstar