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23 February 2010

Investment company dividend heroes

15 investment companies with year on year dividend increases for 26 years or more

UK interest rates have now been at record lows for over a year and with a number of big name companies announcing a cut in their dividend payments, investors seeking income are finding investment opportunities increasingly limited.

With this in mind, the Association of Investment Companies (AIC) has taken a look at investment companies who have consistently increased dividend payments over the longest time periods.  The AIC had collated company views to find out how they have managed to maintain such an impressive dividend record when many investee companies are reducing payments. 

Dividend heroes for 2010
There are 15 investment companies who have increased their dividends each year for 26 years or longer.  Topping the list again this year is City of London who have increased their dividend payments for an impressive 43 years in a row.  Following closely behind are Alliance Trust, Bankers Investment Trust and Caledonia who have all increased payments for 42 years. 

Annabel Brodie-Smith, Communications Director, Association of Investment Companies (AIC) said: “At a time when interest rates are at an all time low and many companies are cutting their dividends, the investment company sector has an enviable track record of dividend increases.   This is because investment companies are able to retain some of the income they receive each year and transfer this to their revenue reserves.   This is a structural benefit for investment companies as open ended funds are required to distribute all their income each year.  Investment companies can build up their revenue reserves during the good years to allow them to pay dividends in difficult years which is known as ‘smoothing dividends.’ ”

Katherine Garrett-Cox, Chief Executive of Alliance Trust PLC said: “Alliance Trust has an established record of growing its dividend payment to shareholders continuously for the last 42 years and has recently grown revenue reserves to protect the income payment in a downturn. We believe that 2010 could be challenging for investors as many companies may struggle to maintain earnings growth required to increase their dividend payments. However, our investment team continually seeks out opportunities to generate income, without compromising capital growth, and we believe that we are well positioned to increase our dividend for the 43rd successive year.”

Stephen King, Finance Director, Caledonia Investments plc said: "We view dependable dividends as an important part of our total return to shareholders. Our investment philosophy of investing in long term businesses has generated substantial distributable reserves, built up over many years, which, together with an ungeared balance sheet, provides a solid platform for our progressive dividend policy. In an environment of increased market volatility and low interest rates, we believe this offers an increasingly attractive package."

Michael Bunbury, Chairman of JPMorgan Claverhouse Investment Trust said: “JPMorgan Claverhouse has a record of increasing its total dividend by at least the rate of inflation in each year since 1972. The actual rate of dividend that shareholders receive has also more than doubled in the past 9 years to the current 16.9 pence per share.

“A key advantage of the investment trust structure is in the ability to build a revenue reserve which can be drawn upon, to help maintain or continue to grow the dividend, when the economic and corporate environment dictates. This ability is not available to unit trusts and open ended investment companies. JPMorgan Claverhouse has built up a revenue reserve that is currently equivalent to 1.25 years its present total dividend level.”

AIC Member investment companies with longest record of year on year dividend increases

Companies	Sector	Number of consecutive years dividend increased
City of London Investment Trust	UK Growth & Income	43
Alliance Trust	Global Growth	42
Bankers Investment Trust	Global Growth	42
Caledonia Investments	Global Growth	42
Albany Investment Trust	UK Growth	40
F&C Global Smaller Companies	Global Growth	39
Foreign & Colonial Investment Trust	Global Growth	39
Brunner Investment Trust	Global Growth	38
JPMorgan Claverhouse Investment Trust	UK Growth	37
Witan Investment Trust	Global Growth	34
Scottish Mortgage Investment Trust	Global Growth	34
Merchants Trust	UK Growth & Income	27
Murray Income	UK Growth & Income	26
Scottish Investment Trust	Global Growth	26
Temple Bar	UK Growth & Income	26

Source: AIC Members and their managers. 

- Ends -

Notes to Editors
The Association of Investment Companies was founded in 1932 to represent the interests of the investment trust industry – the oldest form of collective investment. Today, the AIC represents a broad range of closed ended investment companies, incorporating investment trusts and other closed ended investment companies and VCTs.  The AIC’s members believe that the industry is best served if it is united and speaks with one voice. The AIC’s mission statement is to help Members add value for shareholders over the longer term. The AIC has 345 members and the industry has total assets of approximately £83 billion.

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