24th February 2015
The Association of Investment Companies (AIC) looks at five-year dividend growth rates to see which companies have made the most significant increases…
The AIC’s calculations are based on dividend growth over the past five years, which has been annualised to give a compound percentage rate per year. The Association has highlighted the investment companies yielding 3% or higher that have been raising their dividends significantly, and asked what allows them to do so?
Strong divided growth from Private Equity & Asia Pacific sectors
Eight AIC member companies currently offering a yield of 3% or more have seen five year dividend growth of 15% per annum or higher. The most significant growth has come from F&C Private Equity, which has seen five year dividend growth of 62% and currently offers a yield of 4.8%, having gained shareholder approval to pay income out of capital. Dunedin Enterprise, also from the Private Equity sector, has seen five year growth of 34% per annum, with a most recent yield of 4.4%.
A number of investment companies with a focus in Asia have achieved higher than average growth in their yields, a reflection of fast growth in the region more generally. Japan Residential, from the Property Direct – Asia Pacific sector offers a dividend of 6.3%, and has seen five year dividend growth of 7.6% per annum. Henderson Far East Income, from the Asia Pacific- Excluding Japan sector, has a yield of 5.4% and five year dividend growth of 6% per annum, while Aberdeen Asian Income has growth of 5.9% per annum and a yield of 4%.
Sectors with a specific income focus account for a quarter of the companies with the highest five year increases, with Miton’s Investment Company, from the UK Equity Income sector, offering a yield of 5.3% and five year dividend growth of 35% per annum. Elsewhere, Baring Emerging Europe has so far been able to maintain a high increase on yield despite recent difficulties in these markets, with a five year dividend growth per annum of 45.6%.
Annabel Brodie-Smith, communications director at the AIC, said: “The significant increase in dividends of these investment companies is reflective of fast growth in certain areas such as Asia and some of the special features that investment companies have when it comes to income. It’s well known that investment companies can hold back some income in good times in order to pay it out in leaner ones. They are also able to pay dividends out of capital, using the capital profits made when investments are bought or sold. In addition, investment companies have access to wider range of investments that can generate a higher income, such as the alternative assets of infrastructure and renewable energy.”