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The only two UK funds that have maintained income payouts over the full market cycle

24 October 2014

FE Trustnet research shows two funds have maintained or grown their income payouts in every full year since the start of 2007.

By Gary Jackson,

News Editor, FE Trustnet

Two funds have avoided cutting their dividends in every year since the start of the financial crisis, FE Trustnet research shows, with another nine achieving this in five of the six full calendar years in question.

As part of our ongoing campaign for greater transparency among income funds, FE Trustnet has been busy analysing the income earned and dividends paid by funds in the IMA UK Equity Income sector, turning its attention to the most consistent income growers.

Our data shows that Troy Asset Management’s Trojan Income and the BlackRock UK Income funds are the only two portfolios to have maintained or grown their income in 2008, 2009, 2010, 2011, 2012 and 2013.

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Source: FE Analytics


The average fund in the IMA UK Equity Income sector paid out £287.51 on an initial investment of £1,000 between 1 January 2007 and 31 December 2013, according to our research.

The average annual payout in 2013 was 17.90 per cent higher than those made across 2007.

In addition, the average UK equity income fund increased its payout by 16.01 per cent in 2008 even though total dividends paid by companies in the FTSE All Share index dropped by 25.2 per cent.

In 2009, when the All Share’s total dividends were down 13.96 per cent, funds’ payouts were 6.96 per cent lower than the previous year.

ALT_TAG UK equity income funds also cut their payouts by 3.21 per cent on average in 2010 but lifted them in the following three years, growing them by 8.91 per cent in 2011, 4.37 per cent in 2012 and 4.25 per cent last year.

Our research found that FE Alpha Manager Francis Brooke’s (pictured) five FE Crown-rated Trojan Income fund paid out a total of £333.67 on an initial investment of £1,000 over the period in question. Its 2013 payout was 28.89 per cent higher than 2007’s.

The fund’s annual payout was progressively higher in each of the six calendar years covered.

It grew by 8.75 per cent in 2008, by 1.97 per cent and 3.29 per cent in the coming two years when funds tended to cut payouts and by an average of 4 per cent during the next three years.

Trojan Income is frequently highlighted in our studies on the UK equity income sector, thanks to a strong 10-year track record in growing income while offering a high degree of capital preservation.


The £1.78bn fund is found on the FE Select 100 list of preferred funds and topped the FE Research team’s recent income study, where it scored 291 points out of a total 300.

In this study, it was awarded 96 points out of 100 for its yield, 95 for its dividend stability and 100 for its downside protection.

From a total return perspective, the fund also stacks up well, sitting first quartile over five years with a 73.72 per cent return against the sector’s 59.78 per cent.

It slips in the third quartile over three years as it lagged its peers in the surging markets of 2012 and 2013.

However it is back in the first quartile over one year, as well as shorter time frames, after volatility returned to markets in 2014.

Total return of fund vs sector and index over 10yrs

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Source: FE Analytics


Trojan Income has a clean ongoing charges figure (OCF) of 1 per cent and currently yields 3.91 per cent.

The £344.1m BlackRock UK Income fund, which is managed by Adam Avigdori and Mark Wharrier, is the other IMA UK Equity Income member to have avoided paying a lower dividend over the past six years.

Between 2007 and the end of 2013 BlackRock UK Income paid out £288.77 on an initial investment of £1,000, slightly ahead of the sector’s average total income.

The income earned in 2013 was more than 50 per cent higher than the payout in 2007.

The fund can only really claim five years of dividend growth from the six full years examined, as it maintained its dividend in 2008.

However it grew payouts in 2009 and 2010 by 3.77 per cent and 2.09 per cent respectively when the sector tended to cut dividends and increased income by an average of 4.5 per cent in the next two years.

In 2013, the fund’s total dividend was 15.42p a unit - almost 13 per cent higher than the 13.66p distributed in 2012.

This came even though the UK’s headline dividends fell for the first time since 2010 on the back of weak company profitability.

However, the fund may not be as attractive on a total return basis as it sits in the sector’s fourth quartile over three and five years.

The one FE Crown-rated fund has grown just 41.50 per cent over five years, against the 59.78 per cent of the FTSE All Share.

Things have improved over the shorter term, however, with the portfolio in the first quartile over six months and one year.

The fund is ranked 62nd out of 252 in the FE Research income study with a total score of 199.

It picked up the most points for yield, scooping 71 out of 100, and was awarded a respective 59 and 69 points for dividend stability and downside protection.

Total return of fund vs sector and index over 10yrs

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Source: FE Analytics



BlackRock UK Income has a clean OCF of 0.92 per cent and yields 3.67 per cent.

Our research shows that a number of other funds have managed to grow their payout in five of the six years covered by our study.

It must be noted that some of these funds may have seen one year’s payout jump due to special dividends, which would have resulted in the following year appearing down when the payout returned to more normal levels.

Well-known portfolios with five years of income growth include FE Alpha Manager Adrian Frost and Adrian Gosden’s Artemis Income, Michael Clark’s Fidelity Moneybuilder Dividend, Clive Beagles and James Lowen's JOHCM UK Equity Income and Carl Stick’s Rathbone Income funds.

Next week, FE Trustnet will look at how the former members of the IMA UK Equity Income sector have done from an income point of view, despite failing to hit the sector’s yield requirement.

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