The Dividend Heroes raising payouts since the Rolling Stones released Ruby Tuesday: SIMON LAMBERT on some real long-term investors
In 1967, the Rolling Stones released Ruby Tuesday, Elvis and Priscilla Presley got married and the Beatles’ Sgt Pepper’s Lonely Hearts Club Band took over Britain’s turntables.
In a somewhat less headline-grabbing move, three investment trusts also began an illustrious 56-year career of raising dividends.
The trio, City of London, Bankers and Alliance Trust, sit on top of the Dividend Heroes table compiled by investment trust body, the AIC.
This list celebrates the investment trusts with the longest non-stop history of raising dividend payouts for investors, year-in, year-out.
Goodbye, Ruby Tuesday and hello 56-year dividend record: Three investment trusts have been raising payouts since the Rolling Stones released their 1967 hit single
To make the cut, trusts need to rack up at least 20 years in a row of consistently increasing dividends.
There are 18 investment trusts that have managed that and they make for an interesting bunch.
But before we dig into the list, it’s worth giving a special mention to the eight of the Dividend Heroes that have managed at least 50 years of raising payouts.
They are the three trusts named above, plus Caledonia Investments, the Global Smaller Companies Trust, F&C, Brunner and JP Morgan Claverhouse.
This is an astonishing achievement and one that serves as a timely reminder of why long-term investing can pay off.
| Investment company | AIC sector | Number of consecutive years dividend increased | Dividend yield (%) | 5-year annualised dividend growth rate (%) |
|---|---|---|---|---|
| City of London | UK Equity Income | 56 | 4.65 | 3.25 |
| Bankers | Global | 56 | 2.24 | 4.59 |
| Alliance Trust | Global | 56 | 2.38 | 12.77 |
| Caledonia Investments | Flexible Investment | 55 | 1.82 | 3.64 |
| The Global Smaller Companies Trust | Global Smaller Companies | 52 | 1.21 | 8.48 |
| F&C Investment Trust | Global | 51 | 1.4 | 5.38 |
| Brunner | Global | 51 | 1.97 | 5.44 |
| JPMorgan Claverhouse | UK Equity Income | 50 | 4.71 | 4.88 |
| Murray Income | UK Equity Income | 49 | 4.15 | 1.91 |
| Scottish American | Global Equity Income | 49 | 2.69 | 4.48 |
| Witan | Global | 48 | 2.52 | 6.67 |
| Merchants Trust | UK Equity Income | 40 | 4.57 | 2.44 |
| Scottish Mortgage | Global | 40 | 0.5 | 3.66 |
| Value and Indexed Property Income | Property UK Commercial | 35 | 5.81 | 2.75 |
| CT UK Capital & Income | UK Equity Income | 29 | 3.73 | 1.99 |
| Schroder Income Growth | UK Equity Income | 27 | 4.16 | 3.34 |
| abrdn Equity Income | UK Equity Income | 22 | 6.4 | 5.83 |
| Athelney Trust | UK Smaller Companies | 20 | 4.68 | 1.53 |
| Source: AIC and Morningstar. Investment Trusts with 20-years of raising dividend payouts. Data at 3/3/2023 | ||||
The current dividend yields on this gang of eight range from just 1.4 per cent with F&C, to 4.71 per cent from JP Morgan Claverhouse.
But if you’d bought into one of these trusts halfway through its dividend-raising history you’d be sitting on your own much bigger yield.
This is worked by comparing the dividend payout in pence you get now with the price you paid for a share then.
F&C, for example, yields just 1.4 per cent with a current share price of 966p but 25 years ago a share would have cost you 192p.
An F&C investor who bought a share back then would be getting a yield of 7 per cent based on current payouts compared to the price they paid.
That’s not going to make them as rich as Mick Jagger, but it’s a nice bit of icing on the cake after a fivefold share price rise.
And if they’ve been reinvesting and compounding those dividends, they will have done very nicely on their original investment indeed.
So, what else is in the Dividend Heroes list? Not necessarily what many would expect if they think it’s likely to be packed full of income investments.
In fact, while UK Equity Income trusts make up a big chunk of the list, with the biggest yielder currently Abrdn Equity Income at 6.4 per cent, there is also a sizeable chunk comprised of Global trusts, including the big gun of growth investing.
Scottish Mortgage makes for an unlikely Dividend Hero but it has raised payouts for 40 years in a row. It yields a piddly 0.5 per cent but has managed to average a 3.66 per cent dividend growth rate over five years.
It’s certainly not one for the income seekers, but even after its recent struggles Scottish Mortgage has returned 56 per cent over five years and 350 per cent over ten years. Long-term investors have been rewarded.
The key to investment trusts being able to achieve such lengthy records of increasing payouts lies in their structure, they are allowed to hold back some dividends in the good years to help cover the bad.
This is a feature that investment funds don’t have and while it’s not a reason to always pick a trust over a fund, it is a strength worth considering.
And it’s worth noting that some of these UK-focussed equity income Dividend Heroes might be in a good position to continue to shine. In the new higher interest rate world, investors have looked away from expensive jam-tomorrow growth stocks and towards companies proving they can make profits now.
The portfolios of some of these trusts offer an easy diversified way to play that investment theme and the renewed interest in the UK stock market.
But remember, as ever, do your own research and don’t stick all your eggs in one basket – even if it does belong to a hero.
