Caledonia chalks up 50 consecutive years of dividend growth

Caledonia's aggregate dividend for the year ending 31 March 2017 was 54.8p, an increase of 4.2 per cent on its previous financial year.

It also plans to pay a special dividend of 100p following a number of successful realisations during the year, which amounted to £433m. These include the sale of holiday park operator Park Holidays, which generated £197m, as well as audio equipment company Bowers & Wilkins and financial services companies Close Brothers (CBG) and Capital Today China.

Caledonia Investments is a self-managed investment trust with assets of about £1.9bn, and invests in quoted and unquoted investments, and funds. As of 31 May 2017 the trust was yielding 1.9 per cent, according to Winterflood Securities.

And it is likely to continue growing its dividend, says Ewan Lovett-Turner, director, investment companies research at broker Numis Securities.

"We believe that Caledonia now has a clear strategy to deliver strong long-term performance in both absolute terms and relative to equity market indices," he said. "It is likely to see continued growth and has lots of reserves, which means it can support the dividend if there is a decrease in income. Its income did come down a little bit this year, but it is still looking to cover that dividend."

Investment income for the year to 31 March 2017 was £47.3m, a fall of £3.4m compared with the prior year, which was boosted by a high level of dividends from its unquoted investments.

Despite its good dividend record and recent good performance, the trust still trades at a discount to net asset value (NAV) of about 15 per cent, and sometimes hits levels in excess of 20 per cent.

But Mr Lovett-Turner says: "Caledonia's discount has remained consistently wide [the sector average discount for Global sector investment trusts is currently about 8 per cent]. In part, this reflects the trust's substantial exposure to unquoted assets, meaning the portfolio cannot be expected to perform in line with markets. However, its relative performance has improved over the past three years."

The Association of Investment Companies (AIC) produces a Dividend Heroes survey of trusts that have grown their dividends every year for 20 years or more, and looks at whether a trust has increased its dividend from the amount paid the previous year, but special dividends are generally not included.

As well as the four trusts that have grown their dividends for 50 consecutive years, a further 16 have increased them for 20 years or more.

Investment trusts that have grown their dividends for 20 consecutive years

Source: The AIC, *Please note Northern Investors Company is winding up