Investment trusts paid record dividends of £5.5 billion in the 12 months to the end of March 2022, up 15.4% year-on-year according to research by Link Group.

Dividends from investment trusts have proved much steadier through the pandemic than those from individual companies listed on stock markets thanks to their ability to invest almost anywhere in the world.

The advantages of the investment trust structure, which allows these companies to use their revenue reserves to at least maintain dividends in tougher times, also came to the fore.

Trusts drew on their reserves through the pandemic, but they also took advantage of special rules that permit them to distribute some of their capital gains as dividends. While this revenue reserve fell by 6.8% in 2021, Link says it is likely to start building again as company dividends recover from the pandemic.

Overall, trusts that invest in listed equities held payouts flat at £1.85 billion, though Link expects their dividends to rise by 4% to £1.92 billion by the end of March 2023.

In the first quarter of 2022, dividends from trusts invested in equities in the UK and around the world were 4% higher than the first quarter of 2021 when they reached their nadir of £437 million.

Payouts from trusts investing in alternative assets jumped 25.1% to £3.65 billion during the year to March.

The biggest increase came from venture capital trusts, which handed out £556 million between April 2021 and March 2022, up 65.7% year-on-year, while renewable energy infrastructure funds paid their shareholders £583 million, up 38.3%.

Along with property, the largest dividend-paying alternatives sector, these categories accounted for four fifths of the overall increase in dividends from all kinds of investment trusts in the year to March 2022. Two thirds of investment trust dividends are now paid by trusts focused on alternative assets.

According to data from the Association of Investment Companies, top yielding alternative trusts include property plays such as Regional REIT (RGL), Real Estate Credit Investments (RECI) and Civitas Social Housing (CSH) on yields of 8.7%, 8.1% and 6.9% respectively.

Other big dividend payers include NextEnergy Solar (NESF), Gore Street Energy Storage (GSF) and JLEN Environmental Assets (JLEN) from the renewable energy infrastructure sector, offering yields of 6.9%, 6.6% and 6% repectively.

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