Investment trust fans will be familiar with the Association of Investment Companies' (AIC) dividend heroes - the investment trusts which have increased dividends for 20 consecutive years or more. Now the AIC has produced a new list of next generation dividend heroes - the 18 investment trusts that have increased dividends for at least 10 years running.
The table below shows the five investment trusts in the next generation list that have had the longest records of dividend increases - all at least 17 consecutive years. It shows stated dividend increases over the past five years as well as their stated dividends in pence.
Dividend payments for financial years (p) | |||||
|---|---|---|---|---|---|
| Schroder Income Growth (SCF) | Invesco Income Growth (IVI) | F&C Capital & Income (FCI) | Northern Investors (NRI) | Threadneedle UK Select (UKT) | |
| 2009 | 8.9 | 8.65 | 8.25 | 7.3 | 3.75 |
| 2010 | 9.1 | 8.85 | 8.45 | 7.7 | 3.9 |
| 2011 | 9.3 | 9.0 | 8.65 | 8.0 | 4.1 |
| 2012 | 9.5 | 9.2 | 9.0 | 9.0 | 4.15 |
| 2013 | 9.8 | 9.55 | 9.45 | 9.5 | 4.25 |
| 2014 | 10.1 | 9.85 | 9.85 | 10.0 | 4.35 |
Increase in financial year dividend payments (%) | |||||
|---|---|---|---|---|---|
| Schroder Income Growth | Invesco Income Growth | F&C Capital & Income | Northern Investors | Threadneedle UK Select Trust | |
| 2010 | 2.25 | 2.31 | 2.42 | 5.47 | 4.0 |
| 2011 | 2.2 | 1.69 | 2.37 | 3.9 | 5.13 |
| 2012 | 2.15 | 2.22 | 4.05 | 12.5 | 1.22 |
| 2013 | 3.16 | 3.8 | 5.0 | 5.56 | 2.41 |
| 2014 | 3.06 | 3.14 | 4.23 | 5.26 | 2.35 |
Schroder Income Growth has increased dividends each year for the longest period - 19 years - according to the company’s stated dividends and has also been one of the most consistent at increasing the dividend growth each year.
Inflation beating: A harder task
But these figures do not allow for direct comparison because the investment trusts have different financial years. They also don’t show how you would have experienced those dividends when compared to the annual rate of inflation.
We looked at the financinal dividend payouts against the rate of inflation for the same time period in order to work out how heroic the next generation of dividend heroes is when compared to the rate of UK inflation for the top five funds.
This paints a more interesting picture. Although the funds post rises in inflation year on year, the majority of the five top dividend heroes struggled to edge those rises above the rate of inflation until the rates fell in 2013.
Between 2010 and 2012 Schroder Income Growth (SCF), Invesco Income Growth (IVI) and F&C Capital & Income (FCI) failed to beat inflation despite edging up their dividend payments by around 2 per cent each year. In contrast Northern Investors (NRI) and Threadneedle UK Select (UKT) both did post dividend rises above the rate of inflation during their financial years, with NRI demonstrating an impressive four out of five years of inflation-beating increases.
There was little consistency between them but with CPI heading towards record low inflation rates in 2015, most funds easily scored higher increases than CPI in that period.
Dividend increases compared to CPI inflation over same period
| Schroder Income Growth (August financial year end) | Invesco Income Growth (March financial year end) | F&C Capital & Income (September financial year end) | Northern Investors (March year end) | Threadneedle UK Select (March financial year end) | ||||||
| Dividend Growth (%) | CPI (%) | Dividend Growth (%) | CPI (%) | Dividend Growth (%) | CPI (%) | Dividend Growth (%) | CPI (%) | Dividend Growth (%) | CPI (%) | |
| 2010 | 2.25 | 3.14 | 2.31 | 3.37 | 2.42 | 3.05 | 5.48 | 3.37 | 4.00 | 3.37 |
| 2011 | 2.20 | 4.53 | 1.69 | 4.05 | 2.37 | 5.22 | 3.90 | 4.05 | 5.13 | 4.05 |
| 2012 | 2.15 | 2.50 | 2.22 | 3.47 | 4.05 | 2.15 | 12.50 | 3.47 | 1.22 | 3.47 |
| 2013 | 3.16 | 2.68 | 3.80 | 2.78 | 5.00 | 2.67 | 5.56 | 2.78 | 2.41 | 2.78 |
| 2014 | 3.06 | 1.50 | 3.14 | 1.67 | 4.23 | 1.26 | 5.26 | 1.67 | 2.35 | 1.67 |
Source: Morningstar
Dividend growth above inflation (yes or no?)
| Calendar year | Schroder Income Growth | Invesco Income Growth | F&C Capital & Income | Northern Investors | Threadneedle UK Select Trust |
| 2010 | N | N | N | Y | Y |
| 2011 | N | N | N | N | Y |
| 2012 | N | N | Y | Y | N |
| 2013 | Y | Y | Y | Y | N |
| 2014 | Y | Y | Y | Y | Y |
Source: Morningstar
The good news
The funds have managed to boost their dividends each financial year for 10 years which many trusts do not manage to do. Whether or not these match up to inflation over the same period, the regularity of dividend rises should give comfort, as should performance records.
As well as increasing its financial year dividend for 17 consecutive years, Invesco Income Growth (IVI) has returned positive results to shareholders each year since 2008, when the fund lost 28.63 per cent - still less than several of its peers. Last year the fund returned 7.07 per cent compared with 24.58 per cent the year before. The company aims to produce income and capital growth above the UK stock market and pay dividends above the rate of inflation. The fund has a yield of 3.5 per cent yield and pays a quarterly dividend.
Schroder Income Growth has also delivered solid long-term returns, demonstrating an ability to spot value in UK companies as well as raising dividends.
Northern Investors Company delivered returns of 10.23 per cent in the year to date. However, this fund is in the process of realising its assets. The Newcastle-based business stopped making new investments in 2012 and is returning capital to investors.
Fund performance (% total return)
| 2015 | 2014 | 2013 | 2012 | 2011 | 2010 | |
| F&C Capital & Income IT | 3.78 | -0.99 | 22.33 | 13.57 | -2.90 | 13.23 |
| Invesco Income Growth Trust | 1.53 | 7.07 | 24.58 | 20.24 | 9.94 | 18.99 |
| Northern Investors Company | 10.23 | 28.59 | 21.31 | 21.32 | 41.67 | 32.33 |
| Schroder Income Growth | 0.56 | 4.90 | 27.23 | 20.35 | -0.19 | 12.38 |
| Threadneedle UK Select Trust | 4.08 | -1.36 | 25.41 | 25.94 | -9.81 | 9.76 |
Source: FE Analytics, as at 16 March 2015
