Heroes welcome | MarketViews

We have recently published our updated list of dividend heroes, the investment companies which have increased their dividends for 20 or more years consecutively.

There are 20 dividend hero investment companies and of these four have increased their dividends for more than 50 years in a row, using their ability to reserve up to 15% of their income to smooth dividend payments in good times and bad.

City of London, Bankers and Alliance lead the way having increased their dividends for a staggering 52 consecutive years. Following closely behind is Caledonia which has raised dividends for 51 years in a row.

So far in 2019 eight dividend heroes have announced another year of increases. In March alone, F&C Investment Trust (48 rises), JPMorgan Claverhouse (46), Alliance Trust(52) and Scottish American (39) announced another annual rise.

Brunner, Witan and Temple Bar achieved their 47th, 44th and 35th increases respectively in February and in January Bankers announced its 52nd annual increase.

Full dividend information on each investment company is available on the AIC’s website. The website shows each investment company’s revenue reserve. This is the income which has been retained by an investment company which can be used to support dividends in more difficult years. The website also shows each investment company’s dividend cover. This shows how many years the current revenue reserve can pay the investment company’s last full financial year of dividends.

Job Curtis, Fund Manager of City of Londonwhich has the longest record of consecutive dividend increases, said: “At the core of City of London’s portfolio are companies that can consistently grow their profits and dividends.

“I also like a relatively diversified portfolio across companies and sectors to benefit from different stages of the economic cycle and to reduce risk. Even the very largest companies can have sudden severe problems, such as when BP had to stop paying a dividend after the Macondo oil disaster in 2010.

“City of London could not have achieved the 52 years of continuous dividend growth without being an investment trust. In the good years for dividends, we retain some earnings to add to our revenue reserves. During periods of dividend cuts, we can draw down our revenue reserve to continue increasing our dividend. In the 27 years that I have been City of London’s fund manager, we have used the revenue reserves seven times. The investment trust structure undoubtedly has significant advantages in providing investors with consistent growth in income. With a 4.3% historic dividend yield, as measured by the FTSE All Share Index, UK equities remain attractive for those seeking income. In general, dividend increases from UK companies were satisfactory during the recent corporate results season.”

“City of London could not have achieved the 52 years of continuous dividend growth without being an investment trust. In the good years for dividends, we retain some earnings to add to our revenue reserves.”

Job Curtis, Fund Manager of City of London

Annabel Brodie-Smith, Communications Director of the Association of Investment Companies, said: “Investment companies have unique benefits when it comes to delivering a dependable and growing dividend to investors. They can retain up to 15% of the income they receive each year, meaning they can squirrel away income in good years to boost dividends in leaner ones.

“This has enabled the 20 dividend heroes to achieve their enviable records of dividend growth, raising dividends for more than 20 years. With interest rates still low, the ability of investment companies to pay dependable and rising dividends is as important as ever.”

All the dividend heroes

The following companies have increased their annual dividends for at least 20 years in a row. Their AIC sector is shown in brackets. Correct at 12/3/2019. (Download as PDF.)

52 years

City of London (UK Equity Income)

Bankers Investment Trust (Global)

Alliance Trust (Global)

51 years

Caledonia Investments (Flexible Investment)

45 years

Murray Income (UK Equity Income)

44 years

Witan Investment Trust (Global)

39 years

Scottish American (Global Equity Income)

36 years

Merchants Trust (UK Equity Income)

Scottish Mortgage Investment Trust (Global)Simon Gergel, manager, Merchants

35 years

Scottish Investment Trust (Global)

Temple Bar (UK Equity Income)

31 years

Value & Income (UK Equity Income)

25 years

BMO Capital and Income (UK Equity Income)

23 years

British & American (UK Equity Income)

Schroder Income Growth (UK Equity Income)Sue Noffke, manager, Schroder Income Growth

21 years

Invesco Income Growth (UK Equity Income)