Next-generation dividend heroes: the top-yielding investment trusts of the future?

Looking for an investment trust that could be a dividend hero of the future? The Association of Investment Companies (AIC) has published an updated table of the next generation of dividend heroes; investment trusts that have increased their dividends for ten or more consecutive years, but less than 20.

The list follows the AIC’s list of dividend heroes, which it published last week, which tracks investment trusts that have increased their dividends every year for 20 or more years.

The trusts in the next-generation list are well-placed to become the dividend heroes of the future. Steadily increasing dividend payouts may also make these investment trusts some of the top funds to invest in.

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“There are 30 investment trusts that make up our next generation of dividend heroes,” said Annabel Brodie-Smith, communications director at the AIC. “Over half of these next generation trusts yield more than 4%. They cover a wide range of sectors from equities to debt, infrastructure and property.”

Brodie-Smith highlighted Patria Private Equity and Foresight Solar Fund as new entries to the club that are celebrating their tenth consecutive year of increasing dividends – “a notable achievement over a turbulent time for markets,” she remarked.

Stalwarts include Schroder Oriental Income (LON:SOI) and BlackRock Greater Europe (LON:BRGE), both of which have increased their dividends for 18 years straight.

Why are dividends important for investment trusts?

One of the key advantages of the investment trust structure is that they are able to reserve up to 15% of profits in any given year, and use this reserve to maintain dividend payouts in years where their strategy might have underperformed.

“Investment trusts can also pay income out of their capital profits and their structure is particularly suitable for high yielding hard-to-sell assets such as infrastructure and property,” says Brodie-Smith.

As such, dividend payments are one of the key advantages to investors of buying investment trusts. A consistent, steadily-increasing dividend is an indicator of a management team that understands their structure and is skilled at executing the trusts’ long term strategy and delivering for investors.

It’s also indicative of good stock selection on the part of the trusts’ managers. “Where earnings go dividends tend to follow,” says Richard Sennitt, Manager of Schroder Oriental Income.

“Whilst we look to own stocks that have a strong income rationale for going into the portfolio this does not mean that we purely focus on the highest yielding names,” he added. “We also look for names that have the potential for upside from a capital perspective.”

Next-generation dividend heroes: the newcomers

The two newcomers to the next-generation dividend hero club are Patria Private Equity (LON:PPET) and Foresight Solar Fund (LON:FSFL).

Patria offers private equity exposure both through private equity funds and by investing directly into private companies.

“However, at an underlying company level, PPET’s portfolio is well diversified and generates a consistent cash yield, usually around 20% of opening NAV per year,” says Alan Gauld, senior investment director and lead fund manager, Patria Private Equity Trust.

“We are delighted that Patria Private Equity Trust (PPET) has made it into the next generation of dividend heroes,” said Gauld. “Historically, there has been a debate over whether private equity trusts should be purely about capital growth or not.

“However, the board of PPET has consistently prioritised returning cash to shareholders, effectively an ongoing return of capital at NAV, over the long term.”

Foresight Solar listed 12 years ago in order to offer investors exposure to renewable energy infrastructure, specifically solar farms.

“Our operational portfolio will continue to produce steady, reliable income from the sale of electricity to the grid,” says Ross Driver, managing director at foresight group and lead Fund manager for Foresight Solar Fund. “We’re proud to have made every dividend payment and to have increased our payout every year. In that time, our dividend has grown 35%.

“Being included in the select group of trusts that have such a positive track record of consistently delivering for their shareholders is great recognition of our commitment,” adds Driver.

Next-generation dividend heroes: the full list

Here’s the full list of next-generation dividend heroes:

^{Source: theaic.co.uk / Morningstar. Data as at 20/03/2025. *A merger between Henderson International Income and JPMorgan Global Growth & Income has been proposed. **A cash offer for BBGI Global Infrastructure S.A has been proposed.}