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AIC research shows strong dividend growth for global growth sector

Nearly half of AIC member global growth trusts have raised dividends year on year for at least the last 10 years, according to research by the AIC.

The research shows 44 per cent of global growth trusts have achieved this performance with the global growth investment company sector outperforming the FTSE All World Index over the last three, five and 10 years.

AIC spokesperson Jemma Jackson says the structure of the closed ended sector lends itself well to raising dividends.

She says: “Investment trusts can retain up to 15 per cent of the dividends they receive each year and transfer this to their revenue reserves. These reserves can be built up in good years and used to bolster dividends to shareholders in other years – known in the industry as ‘smoothing dividends’.”

The Bankers Investment Trust manager Alex Crooke says that global equity markets have been benefiting from low interest rates providing cheap liquidity.

He says: “The advent of creeping inflationary pressures across a number of areas is leading to higher interest rates and will act as a dampening force on the upward movement of share prices. The market is moving to a phase where stockpickers will flourish, as not all companies will be able to pass on higher costs and grow profits.”

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