Investors searching for the ‘next generation’ investment trusts that offer the prospect of consistent dividend growth can choose from a 21-strong list, including two First 50 funds for beginner investors.
Trade body the Association of Investment Companies (AIC) has put together the list, which comprises trusts that have consecutively increased their dividend each year for at least 10 years, but less than 20 years.
Two UK equity income trusts appear at the top of this list, with Perpetual Income & Growth and Standard Life Equity Income in first and second spot with 18 years and 17 years of dividend increases respectively.
Overall, eight of the 21 trusts hail from the UK equity income sector or the UK smaller companies sector. This highlights the advantages associated with backing a closed-ended, income-focused investment company, which can draw on a 'reserve' account to bolster income during challenging markets. A total of 15% of income generated by the trust can be stored each year.
Unit trusts, which are open-ended funds, are not able to offer this function and, as a result, virtually all of the UK equity income open-ended funds cut their dividends during the 2008 financial crisis. Investment trusts, on the other hand, simply drew on their 'rainy day' reserves during the crisis to either maintain or grow their dividends.
Annabel Brodie-Smith, communications director at the AIC, comments: “With four new joiners, there are now 21 investment companies that have increased their dividend every year between 10 and 20 years – the next generation of dividend heroes. Looking at the whole industry, 13% of investment companies have now increased their dividend every year for 10 years or longer.”
Trusts that have increased dividends for 20 years or more
The AIC revealed a separate list of trusts that have posted consecutive dividend increases for at least 20 years last week. This list included four Moneywise First 50 funds.
Additional reporting by Kyle Caldwell at our sister magazine Money Observer.