War in the Middle East is already stoking up inflation, meaning there will be no let-up in the rising cost of living. One way to beat the squeeze from the ‘cruellest tax’ is to buy dividend-paying stocks.
Reinvest their payouts and you can profit from the wonder of compounding while boosting your purchasing power. Investment trusts have some big advantages when it comes to dividends.
In this article, we explain what those advantages are. We also reveal the Association of Investment Companies’ (AIC) ‘Dividend Hero’ trusts that have near six-decade-long track records of growing their payouts.
And we shine the spotlight on the Dividend Heroes that have delivered the best returns on a 20-year share price total return basis. These are the dividend ‘Super Heroes’ if you will. One key takeaway from our research is this: going global really does pay dividends.
Inflation-busters
Cash savings rates are often fixed which means your money won’t buy as much if the cost of living goes up. However, if your dividends go up each year, you can beat the rate of inflation and your money goes further.
Investment trusts have a certain trick up their sleeve that enables them to pay a growing stream of dividends, even in uncertain times.
While dividends are never guaranteed to be paid, investment trusts are permitted to hold back up to 15% of the income they receive from their portfolios. They can use that money to boost dividends during lean spells, when businesses in their portfolio may be cutting their own payouts.
This structure has enabled many investment trusts to pay rising dividends through good and bad years for decades, a record unrivalled by unit trusts.
Meet the Heroes
There is a way to find out which investment trusts have the longest history of increasing dividends each year. That is by looking at the Dividend Heroes list on the AIC’s website. To belong to this club, trusts need to have increased dividends for 20 or more years in a row.
Currently, 10 of these Heroes have over half a century of unbroken annual increases under their belts, and three are on the cusp of reaching the 60-year milestone: City of London (CTY), Bankers (BNKR) and Alliance Witan (ALW).
These aren’t necessarily the trusts with the highest-yields or the funds delivering the fastest dividend growth. Nevertheless, Hero status is a real badge of dividend-paying consistency.
Pre-eminent hero
Effectively a ‘best ideas of the FTSE 100’ investment vehicle, City of London has benefited from the long-run stewardship of Job Curtis. He has managed this venerable trust since 1991, so for 34 years.
The conservatively-managed trust is approaching a landmark: the delivery of its 60th consecutive year of dividend growth. This record is unmatched in the investment trust sector.
This consistency has been a hallmark of the strategy under Curtis, who now manages the trust alongside deputy manager David Smith.
As Kepler Trust Intelligence points out:
‘Few UK equity income strategies can match the long-term consistency of City of London, in our view. Under Job’s stewardship, the trust has quietly compounded income and capital for more than three decades, comfortably ahead of the broader UK market.’
Kepler continues:
‘This year’s potential 60th consecutive dividend increase would further cement City of London’s status as the pre-eminent AIC Dividend Hero, a testament to the resilience of its underlying portfolio, prudent use of revenue reserves, and the managers’ long-term disciplined approach.’
20-year star turns
The table below shows the Heroes that have delivered the best share price total returns over two decades.
Scottish Mortgage
Share price – £13.73
Premium to NAV – 2.7%
The standout 20-year performer is Scottish Mortgage (SMT). The giant of the AIC Global sector has generated a stellar 1,375% share price total return. Launched in 1909, Scottish Mortgage is considered to be Baillie Gifford’s flagship investment trust.
Growth is the focus for the fund, whose stated aim is to ‘identify, own and support the world’s most exceptional growth companies’. However, Scottish Mortgage is also a Dividend Hero, having increased the dividend for 43 years on the spin.
Popular with retail investors, the portfolio offers exposure to public companies including Amazon (AMZN), Nvidia (NVDA) and TSMC (TSM). But its biggest position is a private company, namely Elon Musk’s Space Exploration Technologies. ‘SpaceX’ is believed to be eyeing a Wall Street IPO later this year at a record valuation.
For years, Scottish Mortgage has been known for its willingness to back ambitious private companies long before they reach public markets.
F&C Investment Trust
Share price – £12.80
Discount to NAV – 6.7%
The world’s oldest investment trust, F&C (FCIT) has returned 575.6% over the past 20 years. It is also the best-performing AIC Global sector constituent over the past five years.
Managed by Paul Niven, who oversees the strategic and tactical allocation, F&C is a ‘one-stop shop’ for global growth and income. Its multi-manager portfolio is well-diversified across regions, investment styles and sectors.
This diversification has enabled the FTSE 100 trust to adapt more effectively to rapidly changing market environments than many of its peers. F&C has also increased its dividend for 55 consecutive years.
As Kepler Trust Intelligence observes:
‘FCIT benefits from strong revenue and distributable capital reserves, meaning the board should have the capacity to support further dividend increases in the years to come, including in the event of an economic downturn.’
Murray International
Share price – 349.5p
Premium to NAV – 0.53%
The third best-performer over a 20-year timeframe is Murray International (MYI), the diversified global equity income trust. Its recent strong performance is reflected in a modest premium to NAV. The fund achieved Dividend Hero status after delivering an increased dividend for the 20th consecutive year in 2024.
Murray International has generated a share price total return of 550.3% over the past two decades. These days, it is managed by Aberdeen’s Martin Connaghan and Samantha Fitzpatrick with a tilt towards value stocks.
The trust aims to achieve an above-average dividend yield, with long-term growth in dividends and capital ahead of inflation.
Top 20 holdings as of end-February included tobacco titan Philip Morris (PM), financial derivatives exchanges group CME (CME) and tech giant Cisco Systems (CSCO).
Best of the rest
Global trusts dominate the top 10 best-performing Heroes on a 20-year view.
City of London’s Janus Henderson stablemate Bankers (BNKR) has delivered a 484.5% return.
Brunner (BUT), the all-weather portfolio boasting 54 years of unbroken dividend growth, has returned 473.2%. And The Global Smaller Companies Trust (GSCT), with 55 years of successive increases under its belt, has returned more than 460%.
| Dividend Hero | AIC Sector | No. of Increases | 20 year share price total return (%) |
| Scottish Mortgage | Global | 43 | 1374.79 |
| F&C | Global | 55 | 575.6 |
| Murray International | Global Equity Income | 21 | 550.3 |
| BlackRock Smaller Companies | UK Smaller Companies | 22 | 498.4 |
| Bankers | Global | 59 | 484.4 |
| Brunner | Global | 54 | 473.2 |
| Global Smaller Companies | Global Smaller Companies | 55 | 462.2 |
| Alliance Witan | Global | 59 | 444.6 |
| Henderson Smaller Companies | UK Smaller Companies | 22 | 434.9 |
| City of London | UK Equity Income | 59 | 394.6 |
| Source: The AIC/Morningstar | 16/03/2006 to 16/03/2026 |
The greater inherent growth potential in smaller companies also explains the presence of two UK small cap trusts in the top 10.
Both have graduated from being ‘Next Generation Heroes’ – having increased dividends for at least ten years but less than 20 – to fully-fledged Dividend Heroes. These are BlackRock Smaller Companies (BRSC), which is merging with BlackRock Throgmorton (THRG), and Henderson Smaller Companies (HSL), which has returned 453% on a 20-year view.
You might also like these stories:
