What are Dividend Heroes and how can they supercharge your investment portfolio?
What are the Dividend Heroes?
The Dividend Heroes are an elite group of Investment Trusts recognised by the Association of Investment Companies - the industry body founded in 1932 to represent Investment Trusts - for consistently increasing their dividends for a minimum of 20 consecutive years. A further group of trusts have been touted as the "next generation" of Dividend Heroes, with over 10 years' of consistent dividend increases under their belts.
Most of the trusts on these lists are perennially popular, but if you aren't familiar with them yet, they can make a sensible choice for investors who prioritise a steady source of income. Though the threshold to become a Dividend Hero is 20 years, many of them have in fact been increasing their dividends annually for much longer. For example, City of London Investment Trust and F&C Investment Trust have grown their dividends for 56 and 51 years respectively.
Who are the Dividend Heroes?
At the time of writing, there are 18 Dividend Heroes and a further 27 in the next generation. The list below shows the Dividend Heroes organised in order of the number of years of consecutive dividend increases.
Source: AIC. Correct as at 01/03/23.
Dividend Heroes with the highest yields
If you’re an investor looking for some solid income-earning additions to your portfolio, then the Dividend Heroes are a great place to start – they have to have a very credible pedigree to even make it onto the list to start with.
But if we already know they consistently pay out dividends, and increase them every year, which ones have actually produced the highest yields of the bunch? We’ve crunched the numbers to find the 5 Dividend Heroes with the highest dividend yield (this is the annual dividend or income payment, expressed as a % of your total investment), sorting them in descending order, and we’ve also recorded the number of years of consecutive dividend increases too.
Here are the 5 which tick both the amount and the longevity boxes most.
Dividend Hero | Number of years of consecutive dividend increases | Dividend yield (%) |
22 | 6.48 | |
35 | 5.86 | |
50 | 4.73 | |
56 | 4.68 | |
20 | 4.68 |
Source: AIC. Data correct as at 03/03/23.
1. abrdn Equity Income Trust
abrdn Equity Income Trust is an Investment Trust which invests heavily in UK companies, with over 99% of its portfolio in firms based in the UK such as BP, NatWest and Imperial Brands. It describes itself as an ‘index-agnostic’ trust, meaning that it doesn’t track any particular index, like many other trusts do. Instead, abrdn Equity Income Trust states that its aim is to focus on change by ‘evaluating changing corporate situations’ and identifying the ‘best ideas from the full UK market cap spectrum’. It’s a relative newcomer to the Dividend Heroes list, with 22 years of increases under its belt, and its current dividend yield sits at a robust 6.48%.
2. Value and Indexed Property Income
Value and Indexed Property Income has a long history as a Dividend Hero with 35 years of consecutive increases to its name. This Investment Trust is property focused – mostly in directly-held UK commercial property – though it does have a small (8%) proportion invested in cash too. Its top 5 tenants (companies that it leases property to) are M&S, HM Government/Councils, Premier Inn, Co-Op and Sainsburys. Value and Indexed Property Income states that it is best suited to investors who seek ‘long-term (at least 5 years) real growth in dividends and capital value’, and at the time of writing, has a healthy dividend yield of 5.86%.
3. JPMorgan Claverhouse
JPMorgan Claverhouse was launched in 1963 and has an impressive 50 years of dividend increases under its belt. This trust aims to capture both capital and income growth from companies listed on the London Stock Exchange, and prides itself on its ‘prudent, medium-risk investment approach’ which generates ‘steady returns and annual income growth at a rate close to or above inflation’. Its top holdings include AstraZeneca (which you might remember as a key vaccine developer during the Covid-19 pandemic), BP and Shell. As at March 2023, JPMorgan Claverhouse boasts a nice and uber-reliable 4.73% dividend yield.
4. City of London Investment Trust
This long-standing Investment Trust dates all the way back to 1891 and is one of the oldest trusts on the market. Its aim is ‘to provide long-term growth in income and capital, principally by investment in equities listed on the London Stock Exchange’ and counts companies such as British American Tobacco, Unilever and HSBC among its top 10 holdings. Over a quarter (25.18%) of City of London’s investments are in the financial sector, but it also invests in consumer staples (20.22%), industrials (11.04%) and energy (8.87%). Its dividend yield stands at a rosy 4.68% at the time of writing.
5. Athelney Trust
A brand-new addition to the Dividend Heroes list in 2023, Athelney Trust is a young Investment Trust (launched in 1994) and is one of the ten pioneer members of the Alternative Investment Market. Despite being one of the 5 Heroes with the highest dividend yields, Athelney has less than £5m of AUM, which means that liquidity in its shares is likely to be very limited (you might struggle to buy or sell it when you want to) and you might find it difficult to buy it through the usual online investing platforms – so probably not the best option unless you’re an experienced investor. Its top holdings include Jarvis Securities and Liontrust Asset Management. As at March 2023, Athelney has a dividend yield on par with City of London at 4.68%.
How can you buy a Dividend Hero?
Like all Investment Trusts, there are two main ways you can buy a Dividend Hero: with an online investing platform or, in a limited number of cases, directly from the fund manager themselves.
Buy a Dividend Hero with an online investing platform
Purchasing a Dividend Hero with an online investing platform – such as Hargreaves Lansdown or interactive investor - is typically the most common method. When you buy a trust this way, you have a choice of three different types of account that you can keep your shares in. You can opt to put them in a tax-efficient ISA or SIPP (Self Invested Personal Pension), or in a GIA (General Investment Account – no tax benefits though!). Don’t forget that you’ll have to pay fees for doing it this way, usually a trading or dealing fee for the handling of the shares, as well as any charges that usually come with your account.
Dealing fees for listed securities range from about £5 to £10 on platforms. These charges aren’t so material for larger holdings, but if you’re a beginner, or drip-feeding say £100 in a month, then you might be better off looking at funds which don’t tend to carry transaction charges. On the other hand, for Investment Trusts, many platforms such as Hargreaves Lansdown will cap their annual charges, which can make Investment Trusts a canny way to access markets for those with larger holdings.
Buy a Dividend Hero direct from the fund manager
Alternatively, in the case of two fund managers, you can opt to buy a Dividend Hero directly. This can be more cost-effective and you can use one of their existing ISA products to make your investment as tax-efficient as possible. Just bear in mind that you will find your choice of Investment Trusts is very limited if you buy direct, and you’ll end up with multiple accounts all over the place - if you build a diversified portfolio.
For example, you can use a Columbia Threadneedle ISA to invest in Investment Trusts, but you’ll be limited to a choice of just 11 and face a minimum lump sum of £500 or minimum monthly investment of £50. abrdn, on the other hand, also allows you to invest in abrdn Investment Trusts via one of their ISAs, but it’s subject to a minimum investment of £1,000 lump sum or £100 per month per trust. So as always, make sure to read the small print!
We’d typically say that a platform charge is worth it for the ease it brings.
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Created with expert insights and data from the AIC.
