The Dividend Heroes increase payouts since the Rolling Stones released Ruby Tuesday: SIMON LAMBERT on the 18-strong list of true long-term investors
In 1967, the Rolling Stones released Ruby Tuesday, Elvis and Priscilla Presley got married, and the Beatles’ Sgt Pepper’s Lonely Hearts Club Band took over the British turntables.
In a slightly less conspicuous move, three investment funds also embarked on an illustrious 56-year career of raising dividends.
The trio, City of London, Bankers and Alliance Trust, sit at the top of the Dividend Heroes table put together by the investment institution, the AIC.
This list celebrates the investment funds with the longest non-stop history of increasing dividend payouts for investors, year in, year out.
Goodbye Ruby Tuesday and hello 56-year dividend record: Three investment funds have increased payouts since the Rolling Stones released their 1967 hit single
To make the cut, trusts must deliver consistently rising dividends for at least 20 years in a row.
There are 18 mutual funds that have done that and they make an interesting couple.
But before we get into the list, it’s worth giving a special mention to the eight Dividend Heroes who have managed to increase payouts for at least 50 years.
They are the three trusts mentioned above, plus Caledonia Investments, the Global Smaller Companies Trust, F&C, Brunner and JP Morgan Claverhouse.
This is an amazing achievement and one that serves as a timely reminder of why long-term investing can pay off.
| Investment company | AIC sector | Dividend increased number of years in a row | Dividend yield (%) | 5-year annualized dividend growth rate (%) |
|---|---|---|---|---|
| City of London | UK equity income | 56 | 4.65 | 3.25 |
| Bankers | Global | 56 | 2.24 | 4.59 |
| Alliance trust | Global | 56 | 2.38 | 12.77 |
| Investments in Caledonia | Flexible Investment | 55 | 1.82 | 3.64 |
| The Global Smaller Companies Trust | Global smaller companies | 52 | 1.21 | 8.48 |
| F&C Investment Trust | Global | 51 | 1.4 | 5.38 |
| Brunner | Global | 51 | 1.97 | 5.44 |
| JPMorgan Claverhouse | UK equity income | 50 | 4.71 | 4.88 |
| Murray income | UK equity income | 49 | 4.15 | 1.91 |
| Scottish American | Global Equity Income | 49 | 2.69 | 4.48 |
| white | Global | 48 | 2.52 | 6.67 |
| Traders trust | UK equity income | 40 | 4.57 | 2.44 |
| Scottish mortgage | Global | 40 | 0.5 | 3.66 |
| Value and indexed property income | Property UK Commercial | 35 | 5.81 | 2.75 |
| CT UK Capital and Income | UK equity income | 29 | 3.73 | 1.99 |
| Schröder income growth | UK equity income | 27 | 4.16 | 3.34 |
| abrdn Equity Income | UK equity income | 22 | 6.4 | 5.83 |
| Trust Athelney | British smaller companies | 20 | 4.68 | 1.53 |
| Source: AIC and Morningstar. Mutual funds with 20 years of experience in increasing dividend payments. Data on 3/3/2023 | ||||
The current dividend yield of this gang of eight ranges from just 1.4 percent at F&C to 4.71 percent at JP Morgan Claverhouse.
But if you bought into one of these trusts halfway through the history of raising dividends, you’d be sitting on your own much larger return.
This is done by comparing the dividend payout in pence you get now with the price you paid for a stock back then.
For example, F&C yields only 1.4 percent at a current share price of 966 pence, but 25 years ago a share cost you 192 pence.
An F&C investor buying a stock at the time would get a 7 percent return based on current payouts compared to the price it paid.
That won’t make them as rich as Mick Jagger, but it’s a nice icing on the cake after a fivefold price increase.
And if they reinvested and compounded those dividends, they did very well indeed on their original investment.
What else is on the Dividend Heroes list? Not necessarily what many would expect if they think it’s likely to be full of income investment.
While UK Equity Income trusts make up a large portion of the list, with Abrdn Equity Income the largest yielder currently at 6.4 percent, there is also a significant portion of Global trusts, including the great weapon of growth investing.
Scottish Mortgage is an unlikely dividend hero, but it has been increasing payouts for 40 years in a row. It yields a mere 0.5 percent, but has managed to achieve an average dividend growth of 3.66 percent over five years.
It’s certainly not for income seekers, but even after the recent problems, Scottish Mortgage has repaid 56 percent in five years and 350 percent in ten years. Long-term investors have been rewarded.
The key to investment funds that can achieve such long records of increasing payouts lies in their structure, they are allowed to withhold some dividends in the good years to help cover the bad.
This is a feature that mutual funds don’t have and while it’s not a reason to always choose a trust over a fund, it’s a plus worth considering.
And it’s worth noting that some of these UK-focused stock income Dividend Heroes could be in a good position to continue to shine. In the new world of higher interest rates, investors have looked away from expensive jam-tomorrow growth stocks and towards companies that prove they can now turn a profit.
The portfolios of some of these trusts provide an easy, diversified way to tap into that investment theme and the renewed interest in the UK stock market.
But remember, as always, do your own research and don’t put all your eggs in one basket – even if it belongs to a hero.