In need of a stock market champion? SIMON LAMBERT on the Dividend Hero trusts that have boosted payouts since The Doors sang Light My Fire
If ever there was a time when investors needed a hero, it’s now.
With lockdowns spreading, coronavirus rescue attempts falling flat, shares capitulating on a daily basis and even gold on the slide, things look pretty grim.
A ray of light has arrived, however, from the Dividend Heroes.
Three of the Dividend Hero investment trusts can trace their record of raising payouts all the way back to 1967, when The Doors released Light My Fire to the world
This is the annual Association of Investment Companies round-up of the investment trusts that have raised their payouts year-in, year-out for the longest time.
And while these trusts certainly haven’t been immune to the carnage on the stock market, they can reassure investors with some very long records of lifting dividends.
Top of the league are City of London, Bankers and Alliance Trust, a trio who have achieved an astonishing 53 years of successive increases in their dividend payouts.
That means they have been rewarding investors since the year The Doors released Light My Fire, Jimi Hendrix asked Are You Experienced? and Cream unleashed Sunshine of Your Love.
After you’ve added those songs to your working from home playlist and returned to the here and now, it’s time for a look at two things: a sobering consideration of the recent slump in the Dividend Heroes share prices and a careful evaluation of the bumper yields they now offer.
UK equity income trust City of London’s share price is down 31 per cent over the past month and 23 per cent in a year.
Meanwhile, of the pair of global trusts, Bankers is down 27.2 per cent and 12 per cent over the same period, and Alliance Trust is down 33 per cent and 20 per cent.
The trio highlight the varying yields on offer among the dividend heroes, as not all of the trusts that make the cut focus more on income than growth.
City of London yields a hefty 6 per cent, Bankers 2.6 per cent and Alliance Trust 2.2 per cent.
| Investment company | AIC sector | Number of consecutive years dividend increased | Yield at 13/03/2020 |
|---|---|---|---|
| City of London Investment Trust | UK Equity Income | 53 | 6 |
| Bankers Investment Trust | Global | 53 | 2.6 |
| Alliance Trust | Global | 53 | 2.2 |
| Caledonia Investments | Flexible Investment | 52 | 2.3 |
| BMO Global Smaller Companies | Global Smaller Companies | 49 | 1.6 |
| F&C Investment Trust | Global | 49 | 2 |
| Brunner Investment Trust | Global | 48 | 2.9 |
| JPMorgan Claverhouse Investment Trust | UK Equity Income | 46 | 5.2 |
| Murray Income | UK Equity Income | 46 | 5 |
| Witan Investment Trust | Global | 45 | 3.2 |
| Scottish American | Global Equity Income | 40 | 3.4 |
| Merchants Trust | UK Equity Income | 37 | 7.2 |
| Scottish Mortgage Investment Trust | Global | 37 | 0.6 |
| Scottish Investment Trust | Global | 36 | 4.8 |
| Temple Bar | UK Equity Income | 36 | 6.1 |
| Value & Income | UK Equity Income | 32 | 6.1 |
| BMO Capital & Income | UK Equity Income | 26 | 4.7 |
| British & American | UK Equity Income | 24 | 27.6 |
| Schroder Income Growth | UK Equity Income | 24 | 5.9 |
| Invesco Income Growth | UK Equity Income | 22 | 5.2 |
| Perpetual Income & Growth | UK Equity Income | 20 | 6.8 |
| Source: AIC / Morningstar – investment trusts with at least 20 years of consecutive dividend increases | |||
On the 21-strong list of heroes, there are now ten trusts yielding more than 5 per cent – highlighting how the stock market’s dive since mid-January has driven up potential yields.
Yield isn’t everything though. Among the others on there, a few gems that I would pick out as worth doing your own research on and considering are the global trusts Witan, Scottish Mortgage and F&C.
There is, of course, no guarantee if you bought any of trusts on the Heroes list now that you would either avoid losing some of the capital you put in, or get that same payout in the future.
Jimi Hendrix’s Are You Experienced? album was released in the same year of 1967 that City of London, Alliance Trust and Bankers consecutive dividend rises reach back to
Nonetheless, if you aren’t so rattled that you are still able to weigh up investing while the stock market is on sale, there are a couple of things to note on the trusts making the Dividend Heroes list.
Firstly, they didn’t obtain such long histories of paying out rising dividends by accident.
These tend to be well-run investments that benefit from one of the lesser noted benefits of a trust over a fund – the board of directors who are tasked with holding the fund manager accountable.
That doesn’t always work, as Neil Woodford’s disastrous foray into slapping his name on top of an investment trust showed, but it can be a very good way of holding fund manager’s egos and flights of fancy in check.
Secondly, trusts can hold over money in the good times to help cover the dividend in the bad.
This trick up their sleeves is about to be severely tested, so will we see all 21 of these names on the Dividend Heroes list next year?
The trusts will certainly do all that they can to avoid spoiling their track records and hopefully by then life will look much brighter for everyone.