8th March 2021
85% OF INCOME-PAYING INVESTMENT COMPANIES INCREASED OR MAINTAINED DIVIDENDS IN 2020
- 91% of UK Equity Income investment companies increased or held dividends, compared to 4% of open-ended funds in the same sector
- 100% of Global Equity Income investment companies increased or held dividends, compared to 24% of open-ended funds in the same sector
More than four-fifths (85%) of equity income-paying investment companies increased or maintained their dividends in 2020 despite the impact of the pandemic, new data from the Association of Investment Companies (AIC) can reveal.
Out of 129 equity investment companies yielding more than 1%,1 82 (64%) increased their dividends to shareholders in 2020 with 28 (22%) maintaining the same pay-out as in 2019.2
In contrast, out of 700 open-ended funds yielding over 1%, 159 (23%) increased their dividends in 2020 and none held dividends at the same level as 2019.3
Investment companies’ income resilience was even stronger in the equity income sectors. The following percentages show the proportion of the sector that increased or maintained dividends in 2020:
- Asia Pacific Income – 100%
- Global Equity Income – 100%
- UK Equity Income – 91%4
In comparison, in the IA Global Equity Income sector, 24% of open-ended funds increased or held their dividends, and in the IA UK Equity Income sector, only 4% of open-ended funds increased or held their dividends. (There is no IA equivalent to the Asia Pacific Income sector.)
UK dividends fell 41% in 2020 in response to the COVID-19 crisis, and dividends globally were 12% lower in 2020 than 2019, according to Janus Henderson’s Global Dividend Index. 5
Annabel Brodie-Smith, Communications Director of the Association of Investment Companies (AIC), said: “The fact that so many equity investment companies were able to increase or maintain dividends during such a devastating year highlights the power of investment companies’ income advantages. Many investment companies made use of their revenue reserves, a structural benefit unique to investment companies, which enables them to save up to 15% of the income they receive each year. Investment companies can draw on these reserves to boost pay-outs during difficult times like last year.
“As many investors rely on their investment income to pay for the gas bill or the weekly shop, it’s reassuring to see investment companies are delivering when it really matters. However, it’s important for investors to remember that dividends are never guaranteed. It’s up to an investment company’s board to set a dividend strategy which is in the best interests of their shareholders.”
Equity income-paying investment companies increasing or maintaining dividends in 2020
|
AIC sector |
Number of investment companies |
Number of investment companies yielding over 1% |
Dividend increased |
Dividend increased (%) |
Dividend held |
Dividend held (%) |
|
Asia Pacific |
7 |
5 |
2 |
40.0% |
3 |
60.0% |
|
Asia Pacific Income |
4 |
4 |
4 |
100.0% |
0 |
0.0% |
|
Asia Pacific Smaller Companies |
3 |
3 |
1 |
33.3% |
1 |
33.3% |
|
Country Specialist: Asia Pacific - ex Japan |
11 |
5 |
3 |
60.0% |
1 |
20.0% |
|
Country Specialist: Europe - ex UK |
1 |
1 |
1 |
100.0% |
0 |
0.0% |
|
Europe |
8 |
7 |
3 |
42.9% |
0 |
0.0% |
|
European Smaller Companies |
4 |
2 |
0 |
0.0% |
2 |
100.0% |
|
Flexible Investment |
18 |
9 |
4 |
44.4% |
3 |
33.3% |
|
Global |
15 |
13 |
11 |
84.6% |
2 |
15.4% |
|
Global Emerging Markets |
13 |
9 |
3 |
33.3% |
3 |
33.3% |
|
Global Equity Income |
7 |
7 |
6 |
85.7% |
1 |
14.3% |
|
Global High Income |
1 |
1 |
0 |
0.0% |
0 |
0.0% |
|
Global Smaller Companies |
5 |
1 |
1 |
100.0% |
0 |
0.0% |
|
Japan |
6 |
3 |
3 |
100.0% |
0 |
0.0% |
|
Japanese Smaller Companies |
4 |
1 |
1 |
100.0% |
0 |
0.0% |
|
Latin America |
2 |
2 |
0 |
0.0% |
1 |
50.0% |
|
North America |
6 |
4 |
1 |
25.0% |
3 |
75.0% |
|
North American Smaller Companies |
2 |
0 |
0 |
0.0% |
0 |
0.0% |
|
UK All Companies |
12 |
12 |
6 |
50.0% |
4 |
33.3% |
|
UK Equity & Bond Income |
2 |
2 |
2 |
100.0% |
0 |
0.0% |
|
UK Equity Income |
23 |
23 |
19 |
82.6% |
2 |
8.7% |
|
UK Smaller Companies |
23 |
15 |
11 |
73.3% |
2 |
13.3% |
|
Total |
177 |
129 |
82 |
63.6% |
28 |
21.7% |
Source: AIC/Morningstar. “Dividend increased” = number/percentage of investment companies among those yielding at least 1% that increased their dividend in 2020. “Dividend held” = number/percentage of investment companies among those yielding at least 1% that held their dividend in 2020.
For more information on investment companies’ income benefits read the AIC’s income guide Looking for a little bit more or visit Income Finder, a suite of
resources to help income-seeking investors research investment companies
- ENDS -