The Dividend Hero funding trusts which have hit 59 not out

A trio of Dividend Hero investment trusts have hit 59 not out when it comes to raising payouts every year.

The latest list of Dividend Heroes from the Association of Investment Companies (AIC) highlights the investment trusts with the longest records of growing dividends, year-in, year-out.

Three investment trusts – City of London, Bankers and Alliance Witan – have now been increasing dividends for an astonishing 59 years in a row, dating back to when Geoffrey Boycott hit 267 for the England cricket team against India at Leeds.

That was the same year that Dustin Hoffman and Anne Bancroft packed cinemas with The Graduate and Jimi Hendrix wowed rock fans with Are You Experienced.

To make the Dividend Hero cut, investment trusts must have grown the dividends they pay to shareholders for more than twenty years in a row. 

But highlighting the power of investment trusts for income investors, half the list has now been increasing dividends for at least 50 years in a row. 

And investors who choose to hold the trusts in a stocks and shares Isa could be picking up a growing income every year, tax-free. 

Among those with the longest record of raising payouts are Global Smaller Companies Trust and F&C, which have racked up 55 years, followed by Brunner at 54 years, JPMorgan Claverhouse at 53 years, and Murray Income and Scottish American, with 52 years each. 

The average dividend yield of the twenty dividend hero investment trusts is 3.54 per cent. 

But yields on offer vary substantially, ranging from the bumper 7.41 per cent offered by Athelney Trust to the 0.37 per cent paid by Scottish Mortgage. The latter has edged up payouts for 41 years, despite being a high-growth investment trust with a 400 per cent total return over ten years.

 The average five-year annualised dividend growth rate is 4.7 per cent, with Alliance Witan posting the best dividend growth record since 2021, of 14.52 per cent on average each year.

Murray International became the latest investment trust to achieve 20 years of consecutive dividend rises last year.

Many of the longest-standing dividend hero trusts have a large weighting to dividend-friendly companies. 

For example, City of London with its 59 years of dividend growth, invests 11 per cent of its portfolio in banks, HSBC and NatWest. These were the biggest contributors to its dividend in final six months of last year. 

Other trusts, such as F&C with its 55 years of dividend growth, invest in a broader church of listed and private companies around the world. 

F&C manager Paul Niven says: ‘Rather than relying on a small number of income-generating stocks, we seek to draw income from multiple sources across regions, sectors and investment styles.

‘We invest in established businesses with strong cash flows and a consistent record of paying dividends as well as including companies with the potential to deliver above market growth in their earnings.’

Many dividend heroes invest in the UK, with seven of the 20 members of the AIC’s UK equity income sector and another three part of the UK smaller companies sector. 

Investment trusts with their strong dividend track record appeal to income-seeking investors. They can hold back up to 15 per cent of the income they receive each year in a revenue reserve, meaning that dividends squirreled away from the good years can help ride out the bad ones.

And to trust managers, the title of dividend hero is no less important.  

James Ashworth, co-manager of the Brunner investment trust says which has increased dividends for 54 years in a row says: ‘We wear our AIC dividend hero badge with genuine pride. 

‘It’s one of the first things we mention to prospective investors because it represents a promise that has been kept for over half a century.’

Open-ended investment funds cannot hold back some dividends and must pay out all income received each year.

Annabel Brodie Smith of the AIC says: ‘Investment trusts are ideal for income investing over the long term. Our dividend heroes have shown remarkable resilience, continuing to raise their payouts during high inflation in the 1970s, the recession of the 1990s, the global financial crisis in 2008 and the pandemic.’