The investment trusts that have raised their dividends for more than 20 years are known as dividend heroes

For income-focused investors , investment trusts can be a good choice However, which trusts have raised their dividends steadily over the last 20 years?

For twenty years, twenty investment trusts have raised their dividend payments annually, according to the Association of Investment Companies (AIC). Ten of these alleged "dividend heroes" have gone one step further, extending this record to at least fifty years.

The City of London Investment Trust (LON:CTY), the Bankers Investment Trust (LON:BNKRL), and Alliance Witan (LON:ALW) are the three trusts at the top of the list. For the past fifty-eight years, all three have raised their dividends.

The Murray International Trust (LON:MYI), which makes investments in international stock market opportunities, is the newest member of the league table with 20 years of increasing dividends.

A model we established more than ten years ago to assist readers in creating a global, long-term, "all-weather" collection of investments, two of the trusts on the list are also components of BFIA's investment trust portfolio.

Because of their special structure, investment trusts are able to set aside up to 15% of their annual income as a dividend reserve. This can then be applied in years when businesses don't pay out as much in dividends as anticipated.

Trusts may be especially appealing to income-focused investors because of this characteristic. Trusts were able to rely on these reserves to provide a steady income stream during times like the coronavirus pandemic, when large corporations reduced or suspended their dividend payments.

The AIC's communications director, Annabel Brodie-Smith, stated, "Our dividend heroes have demonstrated remarkable resilience while continuing to raise their payouts during recent and historic high inflationary periods in the 1970s, the recession of the 1990s, the global financial crisis in 2008, and the pandemic."

She continued, "Investment trusts dividend hero track records are exceptional, but dividends are never guaranteed."

The source is Morningstar/AIC. Statistics as of March 13, 2025.

Consideration should also be given to yield, growth, and total return.

Although dividend payment consistency is significant and demonstrates sound governance, it is only one piece of the puzzle and should be taken into account in the round. In addition, investors ought to consider total returns, dividend yield, and dividend growth rate.

The same is true for every element. In certain cases, for instance, a high dividend yield may suggest that a sizable portion of income is being distributed. At other times, a declining share price may give the impression that it is inflated. This is due to the fact that dividend yield is determined by dividing the annual dividend of a trust by the share price as of right now.

Additionally, some markets have greater potential for income than others, but there may be fewer opportunities for growth as a trade-off. Small and mid-cap companies, for instance, are frequently more concerned with reinvesting their profits in expansion initiatives, whereas established large-cap companies typically pay higher dividends.

Is investing in investment trusts a good idea?

In recent years, some investors have been avoiding investment trusts despite the substantial income opportunities available. According to the investment platform Interactive Investor, between January 2020 and December 2024, trusts' average weighting in investor portfolios decreased from 22% to 18%.

Sam Benstead, an investment expert at the platform, says that investors' preference for low-cost passive trackers over actively-managed products can help explain the shift. During the same time period, the average percentage allocated to exchange-traded funds (ETFs) doubled, rising from 5% to 10%.

ETFs may also seem to provide investors with some of the structural benefits they were previously looking for in trusts. For instance, both can be purchased or sold at any moment during trading hours and are traded on exchanges.

In contrast to mutual funds and exchange-traded funds (ETFs), investment trusts have certain special benefits that investors should be careful not to ignore. For instance, they can accumulate dividend reserves. Others consist of:

1. . the ability to trade at a premium or a discount.

Because investment trusts trade on an exchange, the value of their underlying assets (also referred to as net asset value) may not always match the share price of the trust. The main distinction with mutual funds is this. They fluctuate between trading at a premium and a discount. Investors may be able to take advantage of these opportunities to score a deal, benefiting from both the underlying investment performance and a reduction in the discount.

According to Victoria Hasler, head of fund research at investment platform Hargreaves Lansdown, "discounts are sometimes there for a good reason, but sometimes discounts open up because of specific market dynamics and, if you believe that the investments in the fund will perform well in the future, this can present an opportunity to acquire a share in quality assets at an attractive price."

2. closed-ended design.

Unlike traditional mutual funds, which issue and cancel shares when new investors wish to join the fund, investment trusts issue a set number of shares at launch. Since a fund manager of an open-ended mutual fund might have to sell assets at a loss in order to satisfy redemptions, this could be advantageous. Trusts can therefore be a very helpful structure when investing in illiquid assets (such as real estate or infrastructure).

3. The ability to use gearing.

Investment trusts are able to borrow money in order to make investments. In a rising market, this can help them perform better, but in a falling market, it can make losses worse.

4. . independent board of directors.

The independent board of directors in trusts is tasked with protecting the interests of shareholders. They hold the fund manager responsible and keep an eye on performance as part of their job. In general, this aids in advancing sound governance.