Dividend Heroes: investment trusts with best dividend payout history

Find out which investment companies have consistently paid out dividends every year for two decades or longer.

The Association of Investment Companies (AIC) has revealed the top 20 investment companies that have increased their dividend payout every year for 20 years or more.

The annual ‘Dividend Hero’ list includes a trio of investment trusts – City of London Investment Trust, Bankers Investment Trust and Alliance Trust – that have managed to raise payouts every year for 50 years despite market slumps like the 1987 'Black Monday' crash and the 2008 financial crisis.

Best dividend payout history

Here’s a rundown of the investment firms with the best track record of paying out dividends over the last 20 years or more.

Company

Sector

Consecutive years’ dividend increased

City of London Investment Trust

UK Equity Income

50

Bankers Investment Trust

Global

50

Alliance Trust

Global

50

Caledonia Investments

Global

49

F&C Global Smaller Companies

Global

46

Foreign & Colonial Investment Trust

Global

46

Brunner Investment Trust

Global

45

JPMorgan Claverhouse Investment Trust

UK Equity Income

44

Murray Income

UK Equity Income

43

Witan Investment Trust

Global

42

Scottish American

Global Equity Income

37

Merchants Trust

UK Equity Income

34

Scottish Mortgage Investment Trust

Global

33

Scottish Investment Trust

Global

33

Temple Bar

UK Equity Income

33

Value & Income

UK Equity Income

29

F&C Capital & Income

UK Equity Income

23

British & American

UK Equity Income

21

Schroder Income Growth

UK Equity Income

21

Northern Investors Company*

Private Equity

20

*Please note Northern Investors Company is winding up

How they’ve done it

One of the key reasons investment trusts have had such an impressive run of raising dividends is that they can hold money during the good times to cover pay-outs during the bad times.

Annabel Brodie-Smith, communications director of the AIC, explained: “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.”

Job Curtis, a manager at the City of London Investment Trust, also pointed to the investment trust structure as the reason for its success.

He 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 seven 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.”

Why dividends are important

Dividends are payments that companies make to their shareholders.

With investment trusts, investors’ money is pooled and invested in a selection of companies picked by a fund manager and the dividend is a payout made by the trust rather than a single company.

Investors can take the payment as income or reinvest it in order to build up their holdings and potentially earn a larger dividend income in the future.

The Barclays Equity Gilt Study shows that, if you had invested £100 in the UK stock market in 1899, by the end of 2015 it would have risen to £2.23 million with dividends reinvested compared to £14,231 without reinvesting income.

Dividends are also a tax efficient way of gaining income. You can invest up to £15,240 this year in a Stocks & Shares ISA and earn returns tax-free and you can use the Dividend Allowance to earn up to £5,000 of dividend income tax free.

Should you invest?

Although the ACI's Dividend Hero list looks at the companies that have a good track record in dividend-raising, past performance is not a guide to future performance when it comes to investing.

The value of shares, and the income these pay, can fall as well as rise, so you may not get back all or any of what you put in.  

This type of investment is designed for the long term, so you should be happy tying your money up for years.

Not comfortable with risk? Compare Cash ISAs and savings accounts with loveMONEY.

 

More on investing:

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