Shares Magazine – May 23, 2019

INVESTMENT TRUSTS

26 | SHARES | 23 May 2019

We look at trusts raising dividends by more than the cost of living

The dividend heroes

that have beaten inflation

I

nvestment trust dividend

ŚĞƌŽĞƐĂƌĞĐůĂƐƐŝĮĞĚĂƐĨƵŶĚƐ

that have increased their

ĚŝǀŝĚĞŶĚƐĞǀĞƌLJLJĞĂƌĨŽƌĂƚůĞĂƐƚ

20 years in a row. While this list,

ƉƵďůŝƐŚĞĚďLJƚŚĞƐƐŽĐŝĂƟŽŶŽĨ

Investment Companies (AIC),

will help you spot products

with a dividend growth track

record, it doesn’t tell you the

ůĞǀĞůŽĨŐƌŽǁƚŚĂŶĚǁŚĂƚŝƚ

would be in ‘real terms’ when

ĂĚũƵƐƟŶŐĨŽƌŝŶŇĂƟŽŶ͘

/ĨŐƌŽǁƚŚŝŶĚŝǀŝĚĞŶĚƐĚŽĞƐŶŽƚ

ŬĞĞƉƉĂĐĞǁŝƚŚƚŚĞĐŽƐƚŽĨůŝǀŝŶŐ

ƚŚĞŶƚŚĞ͚ƌĞĂů͛ǀĂůƵĞŽĨƚŚĞƐĞ

dividends will be eroded.

Fortunately we have the

ƉƌŝnjĞĚŝŶĨŽƌŵĂƟŽŶ͘Shares has

crunched the past 20 years’

data to see which dividend hero

investment trusts have managed

ƚŽĐŽŶƐŝƐƚĞŶƚůLJďĞĂƚŝŶŇĂƟŽŶǁŝƚŚ

ƚŚĞŝƌůĞǀĞůŽĨĚŝǀŝĚĞŶĚŐƌŽǁƚŚ͘

Three investment trusts have

passed the test over the past two

decades: Bankers Investment

Trust (BNKR), Caledonia

Investments (CLDN) and

JPMorgan Claverhouse (JCH).

They’ve achieved 6.5%, 5.4% and

7.5% average dividend growth,

ƌĞƐƉĞĐƟǀĞůLJ͘

Credit should also go to Witan

Investment Trust (WTAN) which

ŚĂƐŐƌŽǁŶĚŝǀŝĚĞŶĚƐŝŶĞdžĐĞƐƐŽĨ

ŝŶŇĂƟŽŶŽǀĞƌƚŚĞƉĂƐƚϭϬLJĞĂƌƐ͕

averaging an 8.8% hike annually

over that period.

We’ve used the CPI (consumer

ƉƌŝĐĞŝŶĚĞdžͿŵĞĂƐƵƌĞŽĨŝŶŇĂƟŽŶ͕

ǁŚŝĐŚƌĞƉƌĞƐĞŶƚƐĂďĂƐŬĞƚŽĨ

LJĞĂƌƐǁŝƚŚƋƵĂůŝĨLJŝŶŐŝŶǀĞƐƚŵĞŶƚ

trusts eager to hold on to their

ƉŽƐŝƟŽŶǁŝƚŚŝŶƚŚĞ/͛ƐŝŶĚĞdž͘

It can be seen a valuable

ŵĂƌŬĞƟŶŐƚŽŽů͕ŚĞŶĐĞ

investment trusts will do their

upmost to stay in the index. The

risk is that investors may only get

a small increase in the dividend.

ŌĞƌĂůů͕ĂƚƌƵƐƚǁŽƵůĚŽŶůLJŶĞĞĚ

Ϭ͘ϬϭйĂŶŶƵĂůĚŝǀŝĚĞŶĚŐƌŽǁƚŚƚŽ

ƐƚĂLJĐůĂƐƐŝĮĞĚĂƐĂĚŝǀŝĚĞŶĚŚĞƌŽ

ŽŶĐĞƚŚĞLJ͛ǀĞƋƵĂůŝĮĞĚĨŽƌƚŚĞϮϬͲ

year growth stretch.

For example, Merchants

Trust (MRCH) has increased

ŝƚƐĚŝǀŝĚĞŶĚďLJůĞƐƐƚŚĂŶϭй

ŝŶƐŝdžŽƵƚŽĨƚŚĞƉĂƐƚϭϬLJĞĂƌƐ͕

ĂĐĐŽƌĚŝŶŐƚŽĚĂƚĂĨƌŽŵƚŚĞ

AIC and Morningstar. ^ĐŽƫƐŚ

American (SCAM) has a

ƌĞƉƵƚĂƟŽŶĨŽƌǀŽůĂƟůĞĂŶŶƵĂů

dividend growth – its highest was

ϭϯ͘ϯйĂŶĚŝƚƐůŽǁĞƐƚǁĂƐϬ͘κй

over the past two decades.

20 TRUSTS ON THE LIST

Overall there are 20 investment

ƚƌƵƐƚƐƋƵĂůŝĨLJŝŶŐĨŽƌĚŝǀŝĚĞŶĚ

ŚĞƌŽƐƚĂƚƵƐ͘/ŶϮϬϭΘĂŶŬĞƌƐ

Investment Trust, City of London

Investment Trust (CTY) and

Alliance Trust (ATST) achieved

goods and services that impact

ĂůůŽĨŽƵƌĚĂLJͲƚŽͲĚĂLJůŝǀĞƐ͘

QUALIFYING AS A “HERO”

dŚĞĐŽŶĐĞƉƚŽĨĚŝǀŝĚĞŶĚŚĞƌŽĞƐ

ŚĂƐƌĞĂůůLJƚĂŬĞŶŽīŝŶƌĞĐĞŶƚ

Investment Trust Average dividend increase over past 20 years

ĂŶŬĞƌƐ/ŶǀĞƐƚŵĞŶƚdƌƵƐƚ 6.5%

Caledonia Investments ρ͘ϯй

JPMorgan Claverhouse 7.5%

Source: AIC/Morningstar

DIVIDEND HEROES GROWING DIVIDENDS BY MORE

THAN INFLATION EACH YEAR OVER THE PAST 20 YEARS