UK investment industry looks on the raising-dividend side

LONDON | 58pc of  the Association of Investment Companies or AIC members in the UK growth and income sector have been able to raise dividends for at least each of the last 10 years. AIC published Tuesday the results of its latest research and reminded investors of its associated firms’ main track record, which described as ‘impressive’.

In the longer term, though, only 46pc of uk growth and income sector have been able to offer higher dividends each year for 20 years or more, while 55pc in global growth sector have had to cut down dividends at some point during the last 20 years or more. AIC is joined by 348 members and the industry has total assets of approximately £92.8 billion.

The research comes at a time when many equity income funds in the open ended space are being forced to slash dividends: a third of UK equity income funds in the open ended sector cut their dividends last year, according to Dennehy Weller & Co. AIC’s Annabel Brodie-Smith, Communications Director explained that

“What many shareholders are increasingly looking for is a reliable dividend in unreliable times. “Of course dividend increases can never be guaranteed, but investment trusts have a structural advantage over other funds because they are able to squirrel away up to 15% of the income they receive each year into their revenue reserves to help boost dividends in more difficult years.”

In February, several investment companies in the closed ended sector announced continued annual dividend increases. To be specific, Foreign & Colonial Investment Trust announced Monday that it has raised its dividend for 41 years in a row, and Alliance Trust on Tuesday said that it has increased its dividend for the 45th year non-stop. Brunner recently racked up 40 years of annual dividend increases and Temple Bar, an impressive 28 years of annual dividend increases. Within the last month, Witan Investment Trust has also celebrated its 37th year of annual dividend increases.

Charles Luke, manager of Murray Income Trust PLC, commented:

“…for some companies the realities of the global macro-economic environment will put pressure on earnings and consequently the dividends they pay. But in aggregate, payout ratios remain low compared to history so many companies are not over-distributing and strong balance sheets suggest that financial distress is unlikely.” 

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