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Investment trusts need more transparency on dividend cover

Investment trusts have been the jewel in the crown of equity income investors’ portfolios over the past year, but the resilience of their dividend cover now deserves some scrutiny. 

According to a report from Link Asset Services, payouts in total for the sector were 4.2 per cent higher in 2020 than in 2019, despite UK dividends falling 38 per cent and global dividends falling 12.2 per cent over the year. 

Not all trusts were immune to cuts, however, with one-quarter of UK equity trusts choosing to cut payouts, Link says. This stands in contrast to the average UK equity income fund which had to cut its dividend by close to 30 per cent during 2020, according to analysis by Trustnet.

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