Witan Investment Trust, which made the move at the start of February, was one of several investment companies who have announced they are switching from bi-annual to quarterly dividend payments.
Others to have moved to quarterly dividend payments include Foreign & Colonial Investment Trust, Lowland Investment Company, Standard Life Equity Income Trust and Henderson Global Trust.
A total of 72 companies of the AIC’s membership, excluding VCTs, pay a quarterly dividend, with the majority of these having an income focus, from the UK Growth and Income and Global Growth and Income sectors, through to the property sectors.
Interestingly, F&C Commercial Property pays a monthly dividend.
Dividend dates are important for many income hungry investors, and this is particularly the case in the current low interest rate environment. So it’s interesting to see a growing number of companies moving to quarterly dividend payments, suggesting that many investors favour a ‘little and often’ approach to income investing.
In addition, 38 per cent of AIC dividend paying members are currently yielding more than the FTSE 100 average yield of 3.76 per cent, the traditional hunting ground for yield-hungry investors.
It’s interesting to see what a diverse range of trusts are now offering above average yields. The growth of more specialist higher-yielding sectors in recent years such as property, infrastructure and debt, reflects both the growing appetite for income and the strength of the investment trust structure when it comes to investing in illiquid assets. It’s also been interesting to see new income-focused launches in the past few years focusing on the Far East and Latin America.
Income remains very much in vogue in the current low-interest-rate environment, but the investment trust sector has long recognised the importance of dividends when it comes to delivering shareholder value.
Investment trusts are able to retain some of the income they receive each year and hold this in reserve for a rainy day. This has helped many investment companies raise their dividends in both the good times and the bad, with many building up enviable dividend track records, particularly in the long established sectors such as the UK and Global sectors.
Many income-focused investment trusts have been in strong demand in the past few years. But there is a huge diversity across the sector and investors should not invest on yield, or indeed pricing, alone.
It’s important to look at the whole picture, and income seekers may also want to look at charges, discount/premium, dividend cover, gearing, as well of course as the underlying portfolio.
Annabel Brodie-Smith is communications director at the AIC
