City of London Investment Trust (CTY), Bankers Investment Trust (BNKR) and Alliance Trust (ATST) have raised their dividends for 53 years in a row, while a further 18 also qualify as Association of Investment Companies (AIC) ‘dividend heroes' because they have raised their dividends for 20 or more years in a row. These include Caledonia Investments (CLDN), which has raised its dividends for 52 years in a row. Seven trusts have increased their dividends for 40 or more years in a row and five have done this for more than 30 consecutive years.
With interest rates falling the reliability of income streams is even more important. And in difficult market conditions investors can continue to receive dividends even if share prices of investment trusts they hold have fallen.
Part of the reason why investment trusts can keep increasing their dividends is because they can hold back up to 15 per cent of the income they receive from their holdings each year in a revenue reserve. This means that in years when underlying investments do not pay out enough income for dividend increases they can draw on some of the money in their revenue reserves.