Dividend Heroes: The investment trusts raising payouts since England won the World Cup in 1966

Savers have been enjoying some of the highest interest rates in 15 years – but there are tentative signs that the dash to cash might be winding down. 

Cash Isa subscriptions are down 40 per cent from their August 2023 peak, according to Bank of England data.

And it’s not just cash savers and bond investors who have been enjoying income yields above the rate of inflation. So, too, are those buying investment trusts with exceptionally long records of increasing dividends.

For those looking to build a portfolio of income-friendly investments over the long term, there are the so-called investment trust ‘dividend heroes’ which have raised their payouts to investors every year for at least twenty years in a row.

Hunting for dividends? 20 investment trust ‘dividend heroes’ have raised their dividends for 20 years or more in a row – and three since England won the football World Cup 

The Association of Investment Companies has released its latest 20-strong list of Dividend Heroes, the trusts with the longest non-stop history of raising payouts for investors, year-in, year-out.

Astonishingly, half of the 20 dividend heroes have now raised their dividends for fifty years in a row. 

And three of them, City of London Investment Trust, Caledonia Investments and Alliance, have upped their dividends for 57 years in a row – since back when England won the football World Cup.

Interestingly for investors today, each of these trusts’ share price is running at a discount to their net asset value.

Meanwhile, five of the trusts on the list have a dividend yield over 5 per cent: City of London, yielding 5.12 per cent, JP Morgan Claverhouse, at 5.18 per cent, Merchants Trust at 5.24 per cent, Schroder Income Growth at 5.21 per cent, and Abrdn Equity Income with a whopping yield of 8.42 per cent.

Laith Khalaf, head of investment analysis at AJ Bell said: ‘Based on the historic dividend growth achieved by these trusts, after ten years they could be yielding 8 per cent on an investment made today (based on a 5.8 per cent current yield rising by 3.2 per cent per annum).

‘This also makes them an attractive segue for investors approaching retirement and looking to beef up their future income.’

Equity income trusts make up a big chunk of the list. It’s no secret that the UK stock market has been somewhat unloved for the last few years, with the Magnificent Seven stocks across the pond in the US stealing the show with investors.

Jason Hollands, managing director of Bestinvest, said: ‘Let’s not forget two of the London market’s key attributes – along with, at the moment, very attractive valuations: high dividend yields that are very useful for income investors, and the presence of a wide variety of listed investment trusts and investment companies that can provide investors with well diversified portfolios.’

Charles Luke, the manager of Murray Income Trust said the UK is currently an attractive opportunity for income investors.

‘It provides access to companies with appealing long-term growth opportunities at valuations that are attractive on a relative and absolute basis, both in terms of earnings and dividend yields. In effect, investors are earning global income at a knock-down price,’ he added.

How have they managed to raise dividends?

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. 

They don’t have to pay out all the income they receive from their portfolios each year. Instead they can set aside up to 15 per cent in a revenue reserve.

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 – especially for those investors looking for income.

Annabel Brodie-Smith, communications director of the Association of Investment Companies said: ‘Despite a tricky few years for the dividend heroes, ten investment trusts now have at least half a century of consecutive annual dividend increases.

‘They have continued to raise their payouts through the high inflation of the 1970s, recession of the 1990s, the global financial crisis in 2008 and the pandemic – showing their remarkable resilience.’

Laith Khalaf said: ‘The resilience shown by these dividend heroes over such a long time should provide investors with some comfort.

‘Investment trusts can hold back income in the bad years to pay out dividends in the good years, a mechanism which has allowed some to continually raise their dividends for decades.’

Compare the best DIY investing platforms and stocks & shares Isas

Investing online is simple, cheap and can be done from your computer, tablet or phone at a time and place that suits you.

When it comes to choosing a DIY investing platform, stocks & shares Isa or a general investing account, the range of options might seem overwhelming. 

Every provider has a slightly different offering, charging more or less for trading or holding shares and giving access to a different range of stocks, funds and investment trusts. 

When weighing up the right one for you, it’s important to to look at the service that it offers, along with administration charges and dealing fees, plus any other extra costs.

To help you compare the best investment accounts, we’ve crunched the facts and pulled together a comprehensive guide to choosing the best and cheapest investing account for you. 

We highlight the main players in the table below but would advise doing your own research and considering the points in our full guide linked here.

>> This is Money’s full guide to the best investing platforms and Isas 

Platforms featured below are independently selected by This is Money’s specialist journalists. If you open an account using links which have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence. 

DIY INVESTING PLATFORMS AND STOCKS & SHARES ISAS 

	Admin charge	Charges notes	Fund dealing	Standard share, trust, ETF dealing	Regular investing	Dividend reinvestment
AJ Bell*	0.25%	Max £3.50 per month for shares, trusts, ETFs.	£1.50	£9.95 | £5 from 1/4/2024	£1.50	£1.50 per deal	More details
Bestinvest*	0.40% (0.2% for ready made portfolios)	Account fee cut to 0.2% for ready made investments	Free	£4.95	Free for funds	Free for income funds	More details
Charles Stanley Direct*	0.35%	No platform fee on shares if a trade in that month and annual max of £240	Free	£11.50	n/a	n/a	More details
Fidelity*	0.35% on funds	£7.50 per month up to £25,000 or 0.35% with regular savings plan.	Free	£7.50	Free funds £1.50 shares, trusts ETFs	£1.50	More details
Hargreaves Lansdown*	0.45%	Capped at £45 for shares, trusts, ETFs	Free	£11.95	£1.50	1% (£1 min, £10 max)	More details
Interactive Investor*	£4.99 per month under £50k, £11.99 above, £10 extra for Sipp	Free trade worth £3.99 per month (does not apply to £4.99 plan)	£3.99	£3.99	Free	£0.99	More details
iWeb	£100 one-off fee (waived until July 2024)		£5	£5	n/a	2%, max £5	More details
Accounts that have some limits but attractive offers
Etoro*  No investment funds or Sipp	Free	Investment account offers stocks and ETFs. Beware high risk CFDs in trading account	Not available	Free	n/a	n/a	More details
Freetrade* No investment funds	Basic account free,  Standard with Isa £4.99, Plus £9.99	Freetrade Plus with more investments and Sipp is £9.99/month inc. Isa fee	No funds	Free	n/a	n/a	More details
Vanguard  Only Vanguard’s own products	0.15%	Only Vanguard funds	Free	Free only Vanguard ETFs	Free	n/a	More details
(Source: ThisisMoney.co.uk Mar 2024. Admin % charge may be levied monthly or quarterly

 

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