The investment companies that have raised their dividend for 20 consecutive years, and those that are almost there
The AIC has published its list of dividend heroes, those investment companies that have increased their dividend consecutively each year for 20 years or more. There are now 21 dividend heroes as Invesco Income Growth announced its 20th consecutive year of dividend increases in June 2017.
Those investment companies that are leading the pack include, City of London Investment Trust, Bankers Investment Trust and Alliance Trust, who have all increased their dividends every year for 51 years, followed by Caledonia Investments who have increased their dividend for 50 years.
So far in 2018, nine dividend hero investment companies have announced a further year of dividend increases. In March, Alliance Trust achieved 51 years of consecutive dividend increases, and Foreign & Colonial Investment Trust, increased their dividend for 47 consecutive years. Bankers Investment Trust announced their 51st year of dividend increases at the start of the year and other companies that have announced so far this year include: Brunner Investment Trust, who’ve raised their dividend for the 46th consecutive year; JPMorgan Claverhouse, who’ve increased for 45 consecutive years; Witan Investment Trust, 43 years; Scottish American, 38 years; Merchants Trust, 36 years and Temple Bar, 34 years of consecutive dividend increases.
A full list of dividend heroes is available on the next page.
Further dividend information for each member company including the investment company’s dividend history is available on www.theaic.co.uk. In addition to this information, the AIC website shows the revenue reserve of an investment company, the undistributed income that the company keeps as reserves shown in millions. This is the ‘rainy day fund’ that investment companies can use to top up dividends in leaner times, which is made up of income that has been earned in previous years but not paid out. The AIC also publishes the dividend cover, which shows the number of years the current revenue reserves can last based on paying the last full financial year of dividends.
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies, said: “We now have four dividend hero investment companies with more than half a century of dividend increases, an enviable achievement. There are 21 dividend hero investment companies in total which have increased their dividends each year for at least 20 years or longer.
“Investment companies have an important structural advantage, namely, they can squirrel away up to 15% of the income they receive each year to boost their dividends in tougher times. Whilst markets have seen volatility since the start of the year, interest rates remain historically low and income is very much in demand, with many investors relying on regular dividends for everyday spending and bills.”
Dividend heroes. Dividend yield data source: Morningstar. *Please note Northern Investors Company is winding up.
This year, there are also five new joiners to the next generation of dividend heroes, those investment companies which have increased their dividend for over ten consecutive years but less than 20. They are: Standard Life UK Smaller Companies, Henderson Far East Income, HICL Infrastructure, MedicX and International Public Partnerships.
Next generation of dividend heroes. Source: AIC using Morningstar.
Harry Nimmo, manager of Standard Life UK Smaller Companies said: “The strength of the UK Smaller Companies Trust is its consistent approach to identifying and investing in tomorrow’s success stories today. Over the last 10 years, it has seen fledgling companies rising to be members of the FTSE 100 – take NMC Health or Hargreaves Lansdown for example. Our investment process has been unchanged for four economic cycles and our emphasis on risk aversion, resilience, growth and momentum has delivered capital growth and a rising dividend and still feels right for the future. While there may well be significant challenges in the short to medium term, we remain confident that this approach will ensure that patient investors will be rewarded in the longer term.”
Mike Kerley, manager of Henderson Far East Income said: “Asia remains an increasingly attractive source of income as improving corporate governance, record cash on corporate balance sheets and strong earnings growth fuel greater dividend payments. A wide-ranging reform agenda especially in North Asia has also contributed to changing attitudes within corporates towards minority shareholders. Asian companies paid a record amount of dividends in 2017 with the trend expected to continue into 2018.
“The strategy is very much focused on total return with equal emphasis on income and capital growth. To achieve this outcome, the portfolio offers a combination of high yield, sustainable cash-flow generating companies which offer good value alongside names that offer higher underlying growth and attractive valuations with lower current yield but a genuine move towards higher dividend growth potential. As these companies surprise positively on dividends, sending a strong signal about cash flow generation and management outlook, they tend to be strongly re-rated by the market.”
"Our investment process has been unchanged for four economic cycles and our emphasis on risk aversion, resilience, growth and momentum has delivered capital growth and a rising dividend and still feels right for the future" Harry Nimmo, Standard Life UK Smaller Companies
Harry Seekings, Director, InfraRed Capital Partners, Investment Advisers to HICL Infrastructure said: “The delivery of long-term, stable income from a portfolio of infrastructure investments has been at the heart of HICL’s investment proposition since its inception in 2006. The company’s annual dividend has grown in each of the last 10 years and yield has typically been in the range of 4-6%. The Board has announced that the company is on track to deliver its dividend guidance of 7.85p per share for the year ending 31 March 2018 and has provided guidance for a further two years, demonstrating confidence in the portfolio.”
