Dividend heroes of the future revealed

22 March 2017

You may recall that last week, the Association of Investment Companies (AIC) unveiled its list of ‘dividend heroes’. Naturally, Moneywise reported on this.

In short, these are investment companies that have increased their dividend for 20 years or more.

But the AIC is also concerned with the upcoming generation of heroes, and has now compiled a list of those companies that have increased their dividends for between 10 and 20 years. See the table below for the full results.

These 18 companies include two Moneywise 50 First funds: Henderson Smaller Companies, which has increased its dividend for 13 years, and Murray International, which has increased its dividend for 12 years. You can read more about these funds in our interviews with their respective fund managers, Neil Hermon and Bruce Stout.

Annabel Brodie-Smith, communications director at the AIC, says: “Investment companies’ ability to smooth dividends allows them to hold back some income for tough times ahead and is a key advantage of the structure.”

She adds: “There are a healthy number of next generation dividend heroes waiting in the wings, which have increased their dividends each year for between ten and twenty years.”

What are dividends?

Dividends are the amount of a company’s profits that are returned to shareholders in the form of a payment. The most common dividend frequencies are annually, biannually and quarterly. There are no uniform calendar dates for when dividends are paid; it depends on the individual company's ‘fiscal calendar’, the period used by the company for accounting and budget purposes.

For some investors, stable, high dividend payments are an essential reason for owning the shares they do – they use them to pay bills or, if they get enough back, to live on completely. Other people chose to reinvest dividends straight back into shares in order to take advantage of compounding.

Companies offer dividends as a reason to own their shares, and a big company cutting back on its pay-out is often big news. It’s usually interpreted as a bad sign – the company isn’t making a big enough profit, isn’t confident about the future, or is running out of capital.

However, sometimes a dividend is cut because the company would rather reinvest in itself– for example, to open a new site or fund an acquisition. In this case it’s short term pain for a hopefully rosier future, but what’s key is communicating this sufficiently well to investors.

Read more about investment trusts in Investment trusts - the City's best kept secret and Moneywise Investment Trust Awards 2016.

Next generation dividend heroes

Company Sector Number of consecutive years’ dividend increased
Invesco Income Growth UK Equity Income 19
Perpetual Income & Growth UK Equity Income 17
Standard Life Equity Income UK Equity Income 16
TR European Growth European Smaller Companies 14
Athelney UK Smaller Companies 14
BlackRock Throgmorton Trust UK Smaller Companies 13
BlackRock Smaller Companies UK Smaller Companies 13
Establishment Investment Trust Global 13
Henderson Smaller Companies* UK Smaller Companies 13
Artemis Alpha Trust UK All Companies 12
Aberdeen New Dawn Asia Pacific – Excluding Japan 12
Witan Pacific Asia Pacific – Including Japan 12
Henderson EuroTrust Europe 12
Murray International* Global Equity Income 12
Edinburgh Investment UK Equity Income 11
BlackRock Greater Europe Europe 11
Schroder Oriental Income Asia Pacific – Excluding Japan 10
Henderson European Focus Europe 10

*Moneywise First 50 Fund

Source: AIC using Morningstar

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