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Investment trust clients rewarded by dividend rises

Clients with holdings in investment trusts will benefit from Barclays’ and BP’s substantial dividend hikes, says Aberdeen Asset Managers.

Aberdeen says the rises in dividends paid out by UK companies recently will be good news for investors over the long term, as Barclays announced a 10 per cent rise last week and BP and the National Grid, which raised their dividends by 35 per cent and 15 per cent respectively.

The fund manager says investors with holdings in UK equity income investment trusts, with their typically large cap holdings, will find reap the rewards of the higher payouts, especially with the uncertainty surrounding UK and global economies over the next two years.

Unlike Oeics, investment trusts do not have to distribute all the income from the dividends they receive each year, holding some of the money back in their revenue reserves for subsequent, less successful years.

Aberdeen head of investment companies William Hemmings says: “A compelling characteristic of investment trusts is their ability to build revenue reserves which can mean reduced income volatility, despite the ups and downs of capital performance in any particular year.

“The long-established investment trusts that we manage in this area also enjoy lower total expense ratios than many open-ended funds in the same space and so may appeal to investor looking to select their Isa before the tax year end.”

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