The three ‘Dividend Hero’ trusts that have consistently beaten inflation

Laura Suter
2 July 2019

•       Just three ‘Dividend Hero’ investment trusts have delivered inflation beating dividend increases
•       On average the trusts raised dividends by 5.3% a year over 20 years
•       One trust has hiked dividends by 8.4% a year on average

Laura Suter, personal finance analyst at investment platform AJ Bell, comments:

“An investment that consistently hikes it dividend payout above inflation is the Holy Grail for income-hungry investors, and three investment trusts have managed that over the past two decades.

“The much-hailed ’Dividend Hero’ list of investment trusts picks out the trusts that have handed investors an increased dividend every year for at least the past 20 years. However, of the 20 trusts on the list just three have increased the payout above the rate of inflation every year for the past two decades: Bankers, Caledonia and JPMorgan Claverhouse. 

“Caledonia and Bankers are also among the top performers over a 20 year period, returning 580.4% and 474.3% respectively, while also increasing dividends by 5.3% and 6.5% a year on average, respectively. Credit should also go to Witan, which has grown dividends above inflation over the past 10 years, averaging an 8.8% hike annually over that period. It only failed to beat inflation in one year, between 2007 and 2008, and in that year missed the hike by just five basis points.

“The aftermath of the financial crisis proved the trickiest period for fund managers, with a combination of a spike in inflation and tough investment markets meaning that 13 of the 20 funds failed to raise their dividends above inflation between 2009 and 2010. In the following year 11 managers missed the mark. 

“However, that doesn’t mean we should rule out the trusts that have failed to reach this benchmark on occasion, as four trusts only missed one year of above-inflation increases. For example, F&C Investment Trust only increased its payout by 1.5% between 2009 and 2010, when inflation was 3.15%, but over the 20 year period it has handed investors an average annual hike to its dividends of 7.24%. 

“That said, investors need to make sure they dig a bit deeper on the dividend hero list. For example, Merchants Trust increased its dividend by less than 1% in six out of the past 10 years, while Murray Income has failed to raise its dividend above inflation in each of the past three years.”

 

The trusts that beat inflation

Company name

Number of years it didn't beat inflation

Average annual dividend increase over 20 years (%)

20-year performance (total return)

Caledonia

0

5.3

580.4%

Bankers

0

6.5

474.3%

JPMorgan Claverhouse

0

7.2

196.1%

F&C Investment Trust

1

7.2

392.6%

Witan

1

6.0

318.8%

Brunner

1

5.2

278.0%

City of London

1

5.0

250.9%

Scottish Mortgage

2

5.5

822.2%

BMO Capital & Income

2

4.4

284.4%

Scottish Investment Trust

2

6.5

231.9%

Schroder Income Growth

3

4.6

351.5%

Temple Bar

3

4.5

350.8%

Value and Income

3

4.5

330.1%

Invesco Income Growth

3

6.2

327.1%

BMO Global Smaller Companies

4

8.4

777.1%

British & American

4

4.2

41.5%

Murray Income

5

4.3

310.8%

Alliance Trust

5

4.3

305.0%

Merchants

6

2.8

216.7%

Scottish American

9

3.9

265.4%

Average

-

5.32

355.3%

Source: AIC/Morningstar/AJ Bell. Inflation is based on CPI average over the year.

**Full figures are available on request**

Laura Suter
Personal Finance Analyst
Laura Suter is personal finance analyst at AJ Bell. She is a multi-award winning former financial journalist, having specialised in investments. Laura joined AJ Bell from the Daily Telegraph, where she was investment editor. She has previously worked for adviser publications Money Marketing and Money Management, and has worked for an investment publication in New York. She has a degree in Journalism Studies from University of Sheffield.
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