Everybody loves a juicy dividend, and with good reason. Over the long run, they account for around three-quarters of your total returns, provided you reinvest them for growth.
The real beauty of dividend income is that most companies aim to increase their payouts over time, compounding the benefits and helping you outstrip inflation. The following three investment trusts have been doing just that for an incredible 50 consecutive years. Here's to the next half century...
City of London Investment Trust
The City of London Investment Trust(LSE: CTY) offers investors long-term income and capital growth primarily by investing in companies listed on the London Stock Exchange. It has done both of these things, returning 75% over the last five years and currently yielding 3.88%, according to figures from Trustnet.com. By comparison, the FTSE 100 has grown 29% over that period, and currently yields 3.69%.
This isn't a shoot-the-lights-out fund, it is second quartile over one and three years, and has only just beaten its benchmark UK equity income sector. But its record of long-term dividend growth is impressive, and manager Job Curtis pins this on a combination of investing in good companies and its investment trust structure, because it can raid reserves in the good years to fund payouts in tougher times. Curtis has done this in seven of the last 25 years. He says the UK dividend outlook is promising, boosted by sterling's fall over the last nine months.
Bankers Investment Trust
The Bankers Investment Trust(LSE: BNKR) has also delivered a half ton of consecutive annual dividend increases. It invests in a diversified international portfolio with the aim of delivering capital growth in excess of the FTSE All-Share Index, and dividend growth exceeding the retail prices index. Manager Alex Crooke says its growth record actually stretches all the way back to the Second World War with a blip after capital gains tax was introduced in 1966, which prompted companies to make a bumper payout in 1965.
Crooke says the global dividend outlook is mixed because many US and European companies now pay a relatively high percentage of their earnings as dividends. But he still anticipates growth in the range of 3% to 5%, or more if the pound continues to fall against overseas currencies. Over five years, the fund has grown 105%, against 83% on its benchmark global index. The yield is relatively low at 2.25%, but that is hardly surprising given that the trust has leapt an impressive 37% in the last year.
The £2.75bn investment trust giant Alliance Trust(LSE: ATST) has a history going back all the way to 1888 and the last 50 years been a dream for dividend seekers, with growth every step of the way. Its current yield of 1.82% may look low, but again, that is partly a consequence of stellar recent growth, with the trust up an incredible 46% over the past 12 months. Over five years, it has returned 110%.
It has done this by investing in a global spread of stocks, including big names such as Walt Disney, Pfizer, Visa, Amgen, Blackstone and Microsoft. It is also first quartile over one and three years. Whether you want growth today or income tomorrow, you could do worse than putting your trust in these three dividend heroes.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.