45 Years of Dividend Growth

Income-seeking investors may want to take another look at investment trusts

Alanna Petroff 12 March, 2012 | 1:57PM

A handful of dividend-paying investment trusts have been steadily increasing their dividend for the last 45 years, according to Morningstar data and the latest research from the Association of Investment Companies (AIC). City of London Investment Trust (CTY), Alliance Trust (ATST) and Bankers Investment Trust (BNKR) are three closed-end funds that have been able to consistently increase their dividends over the last 45 years, regardless of market peaks and troughs, according to Morningstar data. Caledonia Investments (CLDN) also has a solid track record, with 44 consecutive years of dividend boosts.

"The investment [trust] sector has a long and proud history of delivering returns for shareholders, and what many shareholders are increasingly looking for is a reliable dividend in unreliable times. Investment companies have been aware of the importance of yield for years and the sector’s dividend track record is unparalleled,"said Annabel Brodie-Smith, communications director at AIC, which is a trade organisation for UK-based investment trusts. "Of course dividend increases can never be guaranteed, but investment trusts have a structural advantage over other funds because they are able to squirrel away up to 15% of the income they receive each year into their revenue reserves to help boost dividends in more difficult years. This is known as 'dividend smoothing'."

Jackie Beard, director of closed-end fund research at Morningstar UK, says investment trusts continue to present an opportunity for income-seeking investors.

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About Author

Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.

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