by Kyle Caldwell from interactive investor, 19th April 2023:
There are sound reasons to look beyond ‘dividend hero’ investment trusts, as this research shows.
Many investors like to buy funds and investment trusts that invest in dividend-paying companies or income-producing bonds…
Investors should look beyond the dividend heroes
However, investors should not just simply stick to the investment trusts that have 10 years or more of consecutive dividend increases. In some cases, the total returns have disappointed, while in other cases the dividend yields are low – with some below 2%. In addition, at times there’s been instances of dividend increases being meagre to simply keep the hero status.
By casting nets wider investors can find other income funds with superior performances in terms of total returns, as new research by QuotedData shows.
Andrew Courtney, analyst at QuotedData, screened for investment trusts with a 12-month trailing dividend yield of at least 2.5%. An income growth filter was then applied, which stripped out investment trusts that had failed to increase income returns ahead of the risk-free rate (10-year gilt yield) over the past 10 years. The final criterion – which proved a big hurdle for most income-paying trusts – was to outperform the MSCI All Country World Index over both the last five and 10 years on an annualised total return basis.
Just nine investment trusts pass all the tests
Once all those filters were applied, just nine investment trusts remained. One is a dividend hero – Caledonia Investments – having raised payouts for 55 consecutive years, while Invesco Select Glo Eq and CT Private Equity Trust feature on the next generation dividend hero list, with income increases in the past 12 and 10 years.
However, the other six trusts, BlackRock Sustainable American Income, NB Private Equity Partners, JPMorgan Global Growth & Income, Henderson European Focus Trust, 3i Infrastructure, and Gulf Investment Fund, have not achieved 10 years of consistent dividend increases.
Read more here