The \u2018dividend heroes\u2019 are investment trusts that have an exemplary record of raising their dividends every year \u2013 specifically, as defined by the trusts\u2019 trade body, they have increased their full-year dividends annually for at least the past 20 years.<\/p>\n
But if you are a retired saver who relies on investment trust dividends to fund your living expenses, you don\u2019t just want divis that rise: you want your dividends to rise at a pace that keeps up with inflation so that, over the longer term, your quality of life is maintained.\u00a0<\/p>\n
Which trusts, then, have managed not just\u00a0to raise their dividends every year but also to deliver inflation-beating divi increases annually? And which, even if they have had the occasional year of below-inflation dividend increases, have paid a dividend that has kept pace with rises in the cost of living over the longer term, such as five or 10 years? \u00a0<\/p>\n
Fidelity asked the trusts\u2019 trade body, the Association of Investment Companies (AIC), to identify such trusts \u2013 what we might call the \u2018dividend superheroes\u2019 whose divis have risen in line with inflation and so maintained the standard of living of shareholders who use them to fund retirement.\u00a0<\/p>\n
In recognition that income, while important, is not everything in investment and that capital gains matter too, we also asked the AIC to calculate the total returns of the dividend heroes over the past five and 10 years.<\/p>\n
To the best of Fidelity and the AIC\u2019s knowledge, no such research has been carried out previously.<\/p>\n
Key findings<\/p>\n
We present the AIC\u2019s research in full below. But a couple of key messages stand out:<\/p>\n
\tBroadly speaking, dividends paid by the dividend hero trusts have kept pace with inflation over the past decade. Of the 20 hero trusts, 16 have raised their dividend by enough to beat the rise in the cost of living over 10 years. The results in detail<\/p>\n We now present the AIC\u2019s analysis in detail. We should note a couple of points about the methodology. The research uses the total dividend payments in each trust\u2019s financial year, not calendar years. Those annual divi payments are compared with inflation over the same, ie. non-calendar, years. So if trust X has a financial year that runs from March to March, its divi\u2019s are compared with inflation from March to March. Hence different trusts\u2019 dividends are compared with different inflation figures. Over five and 10 years, however, such differences are unlikely to have significant effects. Figures are as of the close of business on 2 February. The inflation measure used is the Consumer Prices Index (CPI).<\/p>\n Year by year: which trusts\u2019 divis beat inflation every year over the past decade, even during the cost of living crisis?<\/p>\n The following \u2018heat map\u2019 shows the dividend increases of each dividend hero trust over the past 10 years and whether the increase beat inflation (shown in green) or not (red).<\/p>\n","protected":false},"excerpt":{"rendered":"The \u2018dividend heroes\u2019 are investment trusts that have an exemplary record of raising their dividends every year \u2013…\n","protected":false},"author":2,"featured_media":277617,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[114,268,85,46,266,267],"class_list":{"0":"post-277616","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-personal-finance","8":"tag-business","9":"tag-finance","10":"tag-il","11":"tag-israel","12":"tag-personal-finance","13":"tag-personalfinance"},"_links":{"self":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/277616","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/comments?post=277616"}],"version-history":[{"count":0,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/posts\/277616\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media\/277617"}],"wp:attachment":[{"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/media?parent=277616"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/categories?post=277616"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.newsbeep.com\/il\/wp-json\/wp\/v2\/tags?post=277616"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}
\n\tBut over the past five years, when inflation has been higher, more trusts have struggled to pay inflation-beating dividend increases. For example, the most famous of the dividend heroes, City of London<\/a>, which can boast a 59-year record of consecutive dividend rises, has not made a dividend increase that kept pace with inflation since 2020.
\n\tSome of the best records of inflation-beating dividends belong to trusts that do not yield enough to be of interest to income-seeking investors. The Global Smaller Companies Trust<\/a>, for example, increased its dividend by an unbeaten cumulative total of 211% over the past 10 years, but the trust yields just 1.7%. The trusts with the best inflation-beating dividend records all belong to sectors other than equity income or global equity income
\n\tJust one dividend hero trust increased its dividend by an inflation-beating amount in every one of the past 10 years, although that trust, Alliance Witan<\/a> (or its predecessor Alliance Trust), yields only 2.2%
\n\tEven trusts whose dividends have beaten inflation comfortably over the past 10 years may not have delivered a high total return (share price rise plus dividends). Value &\u00a0Indexed Property Income<\/a>, for example, paid an inflation-beating dividend in seven of the past 10 years and the cumulative rise comfortably beat inflation over 10 years, but its total return over the decade was just 25.3%<\/p>\n