Investment trust dividend heroes

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

The Association of Investment Companies (AIC) has recently updated its list of dividend heroes, which are investment trusts that have successfully increased their dividends for the last 20 years or more. There are only 20 of them that make the grade and they are well worth considering if you are looking for a consistent source of income.

Investment trusts have a unique advantage in this respect as, unlike other types of funds, they don’t have to pay out all the dividends they receive from their portfolios each year. Instead, they can save up to 15% and allocate it to a revenue reserve. This allows them to hold back some of the income they collect in good years in order to boost dividends when the distributions might otherwise have to be cut.

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Ten of the dividend heroes have managed to increase their distributions for 50 or more consecutive years, a period that covers numerous financial shocks including: the dot com bubble, the global financial crisis and Covid. If you want to check how reliable the income is likely to be going forwards, you would need to look at the latest accounts to see if the dividend is fully covered by earnings and the size of the revenue reserve relative to the distributions.

Yields

It is important to be aware that not all of the dividend heroes have high yields. A good example is Scottish Mortgage, which is more growth-oriented and although it has increased its distributions for the last 42 years it is only paying 0.46%.

Investors that are looking for a more attractive dividend might be better served by trusts operating in the UK Equity Income sector. These include: City of London, JPMorgan Claverhouse, Murray Income, Merchants, Schroder Income Growth and abrdn Equity Income, all of which have historic yields of over 4%. Please note these yields are not guaranteed.

UK Equity Income dividend heroes

Source: Fidelity International, 23.4.25

The UK Smaller Companies sector is also well represented with three dividend heroes. These have the potential to offer a higher level of capital growth, albeit with a greater degree of volatility along the way. The options are: the Athelney Trust, with a yield of 6.3%; BlackRock Smaller Companies, which is currently paying 3.6%; and Henderson Smaller Companies with its distributions of 3.3%.

Diversification and income growth

If you want to add an element of international diversification to your income you might want to consider one of the global funds on the list. There are several to choose from, with the Murray International Trust having the highest historic yield of 4.4%.

Another key point to consider is how fast the dividends are increasing. Ideally the income should go up in line with or ahead of inflation so that investors who are dependent on it can maintain their standard of living.

The 5-year annualised dividend growth rates vary enormously, but there are three trusts that offer a nice combination of a yield in excess of 3% and a historic growth rate of over 4%. They are: JPMorgan Claverhouse, Scottish American and BlackRock Smaller Companies.

The next generation of dividend heroes

A wider choice is available from the next generation of dividend heroes, which are investment trusts that have increased their dividends for at least 10 years, but less than 20. There are 30 of them in total with more than half yielding over 4%.

If you already have enough exposure to the UK, an overseas mandate could provide additional diversification, along with a good starting yield and high income growth rate. Examples include: Schroder Oriental Income, abrdn Asian Income, and North American Income.

The same can also be said of some of the alternative investment trusts that have made it onto the list, such as: TR Property, Foresight Solar Fund and International Public Partnerships - one of Tom Stevenson’s fund picks for 2025. By including vehicles like these, it is possible to build a well-diversified portfolio that is capable of delivering a reliable and growing stream of income.

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Source: Association of Investment Companies, 17 March 2025. Yield data as at 23 April 2025.