Accordingly, the latest list of companies that have increased their dividends each year for at least 20 years, contains some of the oldest and highly regarded vehicles.
For example, City of London Investment Trust (1891) could this year become the first to reach 50 years of consecutive dividend increases, while UK Equity Income peers JPMorgan Claverhouse and Murray Income both have more than 40 years of yield rises behind them.
However, dividend prospects for the UK’s largest firms remain a very mixed bag, and it is prudent to suggest investors prepare themselves for any turn for the worse.
There have been reports today that a number of heavyweight investors in Barclays want to meet with the board over its decision to cut the bank’s dividend by more than a half this year, while HSBC hit the headlines last month over concerns whether or not it can maintain its pay-out level of 7.9%.
Resources has been another story entirely – dividend cuts have been widespread, and although Shell and BP have maintained pay-outs for the time being, that has not stopped investors feeling nervous.
Stephen Peters, investment analyst at Charles Stanley, does not envisage near-term dividend cuts from the UK Equity Income trusts, though nor does he anticipate dividend growth will be as fast as it has been in the past.
He says: “A lot of UK equity income managers are concerned about dividend cuts – there were around 10 cuts last year in the FTSE 100 – but the vast majority of managers in the closed-ended sector generally underweight those sectors, particularly commodities, which have or will cut their dividends.
“With this in mind, I would argue that the potential shock is not going to come in dividends but in capital returns with outperformance of some of these under owned sectors, such as mining.”
