Five investment trusts in the AIC universe have grown their dividends for 45 years or more while 19 have grown dividends over at least 20 years, according to data from the Association of Investment Companies (AIC).
The report, which was released today, comes at a time when investors are becoming increasingly hungry for income as a means of protecting against market headwinds including China’s growth slowdown, the plummeting oil price and an impending EU referendum for Britain.
Not only is income desirable, it is also more difficult to come by with numerous blue-chips including Rio Tinto, Rolls-Royce, Centrica and Barclays all slashing their dividends since the start of 2016.
This has meant uncertainty for open-ended income funds but closed-ended funds, on the other hand, are under less pressure to achieve their income goals as they are able to stash away up to 15 per cent of their annual earnings, therefore smoothing their dividend payments.
In the below article, FE Trustnet takes a look at the five trusts that have grown their dividends for 45 years or more and how they have managed to do so.
The City of London Investment Trust
Run by Henderson’s Job Curtis (pictured below), this four crown-rated trust has grown its dividend for 49 years and has had its manager at the helm since 1991.
Since 1995, which is as far back as our data stretches, it has managed to provide a return of 357.11 per cent, outperforming its average peer in the IT UK Equity Income sector by 82.61 percentage points and beating its MSCI United Kingdom index by 92.92 percentage points. In terms of shorter time frames, it is in the top quartile for its performance over 10 years and is above-average over one, three and five years.
Performance of trust vs sector and benchmark under Curtis
Source: FE Analytics
While the City of London Investment Trust predominantly invests in UK stocks, Curtis is also able to hold small weightings across other regions. As such, the trust currently has a 3.7 per cent weighting in the US, 2.9 per cent in Switzerland, 2.4 per cent in the Netherlands 1.3 per cent in Germany and 0.6 per cent in Hong Kong. 
These regional weightings make up part of the trust’s diversified portfolio of 115 holdings, almost a quarter of which reside in the financial sector.
The City of London Investment Trust is currently trading on a 1.1 per cent discount, is 10 per cent geared and yields 4.2 per cent. It has an ongoing charge of 0.42 per cent.
The Bankers Investment Trust
Having also grown its dividend for 49 years, the Bankers Investment Trust has been headed up by fellow Henderson manager Alex Crooke since 2003 and resides in the IA Global sector despite being benchmarked against the FTSE All Share index.
The three crown-rated fund’s largest regional weighting is the UK at 35.2 per cent and it also has significant weightings in the US, Europe, Japan and Asia Pacific – these stocks sit across the cap spectrum and are chosen using a predominantly bottom-up value-based approach.
Overall, Crooke is positive that the trust will be able to continue its dividend growth streak in the coming year as well, despite the fact that commodity price sensitive sectors are likely to slash their shareholder pay-outs.
“Stock-picking is vital in these market conditions so that income investors can avoid those stocks likely to produce poor shareholder returns,” he said.
In terms of its performance, the £765m trust has delivered an above-average total return over the last five and 10 years, despite slipping into the third quartile over three years.
The Bankers Investment Trust is trading on a 5.2 per cent discount, is 2 per cent geared and has an ongoing charge of 0.53 per cent. It has a yield of 2.7 per cent and has an annual dividend growth rate of 4.5 per cent over five years.
Alliance Trust is the third and final investment trust to have grown its dividend over 49 years. It is headed up by up by Simon Clements who has been at the helm since 2014, and over this time is has provided a total return of 16.51 per cent, more than doubling the performance of its sector average in the IT Global space.
Performance of trust vs sector and benchmarks under Clements
Source: FE Analytics
Despite this outperformance under the manager and the fact it is in the top quartile over one year as well as three and six months, the £3.3bn trust is currently trading on a 10.1 per cent discount.
This may be to do with the company’s 36 per cent fall in pre-tax profits in 2015 as well as its board shake-up last year, which included the removal of chief executive Katherine Garrett-Cox as well as two other board members.
In his latest outlook, Clements warned that 2016 will be a challenging year due to both political and economic headwinds causing market volatility.
“Our bottom-up analysis allows us to value companies on their own merits and we continue to see opportunities in well -managed companies with sustainable fundamentals,” he said.
“The result is a quality portfolio well positioned to deliver what our shareholders expect – increased value in their investments through capital growth and a rising dividend.”
Alliance Trust is 12 per cent geared, yields 0.7 per cent and has an ongoing charge of 0.69 per cent.
Next up is Caledonia Investments, which is hot on the heels of the three aforementioned funds with consecutive dividend growth of 48 years. The four crown-rated trust is £1.2bn in size and resides in the IT Global sector, currently investing across regions including the UK North America, Asia and Europe.
It is a self-managed trust headed up by Will Wyatt, who leads a team that was introduced to the trust in 2010 following previously lacklustre total returns.
The trust is currently trading at a 20.59 per cent discount, which is wider than its three-year average discount of 18.14 per cent. This could be attributed to its longer term performance, having found itself in the bottom quartile over the last decade, but is mainly due to the fact that close to half the shares are owned by the Cayzer family.
That said, it has delivered a top-quartile total return over one and three years through its concentrated portfolio of open-ended funds and investment trusts.
Caledonia Investments has averaged a five-year dividend growth of 7.2 per cent and currently yields 3.05 per cent. It has an ongoing charge including a performance fee of 1.3 per cent and is 3 per cent geared.
As the name suggests, the final trust on the list invests in companies that are further down the cap spectrum and is the only trust in the AIC universe to do this on a global scale.
It has been managed by Peter Ewins since 2005, who has managed to maintain the trust’s track record of growing its dividend each year since launch – to date, this has been achieved for 45 consecutive years.
The four crown-rated trust has also achieved strong total returns over the manager’s tenure, having provided a top-decile total return over the last decade and a top-quartile return over five years.
Performance of trust vs sector benchmarks under Ewins
Source: FE Analytics
It is benchmarked against a hybrid of the Numis UK Smaller Companies (ex investment companies) and MSCI All Country World ex UK Small Cap indices and, against these, is slightly overweight the UK and the US while remaining underweight all other regions.
F&C Smaller Companies has grown its dividends at an annual rate of 14.2 per cent per annum and currently yields 1 per cent. It is 6 per cent geared, has an ongoing charge including a performance fee of 0.76 per cent and is trading on a 1.5 per cent discount.