As reported last week, 20 investment trusts have delivered at least 20 consecutive dividend increases, with five – City of London (LSE:CTY), Bankers (LSE:BNKR), F&C Investment Trust (LSE:FCIT), Scottish Mortgage (LSE:SMT) and Henderson Smaller Companies – appearing on interactive investor’s Super 60 list of investment ideas.
However, data from the Association of Investment Companies (AIC) shows that waiting in the wings to become dividend heroes are 30 trusts that have increased their dividends for 10 or more consecutive years, but fewer than 20 years. More than half of these next generation trusts yield more than 4%.
The highest yielding next generation dividend heroes are Henderson Far East Income Ord (LSE:HFEL) (11.2% yield), Foresight Solar Ord (LSE:FSFL) (9.8%), and Chelverton UK Dividend Trust (9.2% yield).
Patria Private Equity and Foresight Solar Fund have joined the next generation of dividend heroes this year, having notched up 10 consecutive years of annual dividend increases.
Schroder Oriental Income and BlackRock Greater Europe lead the list, both having increased their annual dividends for 18 consecutive years. They are closely followed by CQS New City High Yield Fund and Henderson Far East Income, which both have an unbroken record of 17 years of dividend increases. Two investment companies have 16 years of dividend increases: International Public Partnerships and abrdn Asian Income Fund.
Three of the trusts in the next generation list are members of the ii Super 60. They are Fidelity Special Values (LSE:FSV), TR Property (LSE:TRY), and Fidelity China Special Situations (LSE:FCSS).
The next generation dividend heroes with the fastest five-year dividend growth per annum are Fidelity Special Values, CT Private Equity Trust and Fidelity China Special Situations.
While high yields offer investors the prospect of higher income today, there are no guarantees that this will result in market-beating returns from a total return perspective – when both capital and income are combined. In addition, dividend growth may be higher for trusts with lower yields today.
Income-paying investment trusts have a particular attraction for investors who want a regular cash flow, because they don’t have to distribute all the income generated by their assets every year.
Investment trusts can hold back up to 15% each year, which means they can build up a “rainy day” reserve to bolster dividend payouts in leaner years. In contrast, open-ended funds must return all the income generated each year to investors.
The next generation of investment trust dividend heroes
Source: theaic.co.uk/Morningstar. Data as at 20/03/2025. *A merger between Henderson International Income and JPMorgan Global Growth & Income has been proposed. **A cash offer for BBGI Global Infrastructure S.A has been proposed.
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