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AIC flags 50-year ‘dividend heroes’

22 March 2017

The trade body highlights three investment companies that have increased dividends for 50 consecutive years and 17 investment companies that have done so for 20 years or more.

Three investment companies have reached the impressive milestone of 50 years of consecutive dividend increases, according to the Association of Investment Companies (AIC) as it released its latest list of dividend heroes – those investment companies that have increased their dividends each year for 20 years or more. The three companies are: City of London Investment Trust, Bankers Investment Trust and Alliance Trust.

Job Curtis, manager, City of London Investment Trust, said: “City of London’s record of growing its dividend every year for 50 years has been achieved both by investing in good companies and also through the investment trust structure. In the good years for dividends, we add to our revenue reserves which we are then able to use in more difficult periods. Indeed, in 7 of the 25 years during my period as fund manager, we have dipped into revenue reserves to help grow the dividend.

“In our view, the dividend yield from UK equities remains attractive compared with the main alternatives and dividend growth has been augmented by the fall in the value of sterling over the last nine months.”

Alex Crooke, manager, Bankers Investment Trust said: “The key is to invest in companies that themselves focus on cash generation and distributing dividends throughout economic cycles.

“The current outlook for income is more muted than previous years, partly because dividends, after lagging the recovery of corporate earnings post the 2008 crash, have now caught up.

“Many companies in the US and Europe are now paying out a relatively high percentage of their earnings as dividends and therefore fund managers need to carefully focus on those industries where earnings are rising.”

The AIC pointed out that an additional seven investment companies have already announced dividend increases for their 2016 year-end, with Foreign & Colonial Investment Trust reaching 46 years of consecutive dividend increases, Brunner Investment Trust reaching 45 years, JPMorgan Claverhouse Investment Trust 44 years, Witan Investment Trust 42 years, Scottish American Investment Trust 37 years and both Scottish Investment Trust and Temple Bar announcing their 33rd year of consecutive dividend increase. For a full list of dividend heroes, please see the table below.

Annabel Brodie-Smith, communications director, AIC, said: “In the current low interest rate environment, with inflation creeping up, the ability to ‘smooth’ dividends is a unique advantage of the investment company structure. Investment companies can store up to 15% of the income they receive each year and can use these reserves to boost dividends when times get tough in the future.

“To celebrate the success of these investment companies which have increased their dividends year in year out for over 20 years, the AIC has launched a dividend hero logo.”

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