Investment trust dividends fell for the first time in a decade in the first half of 2021 but still managed to outperform the wider market “by a mile”, according to a report from Link Group.
Between January and June investment trust pay-outs fell by 3.1% to £891.9 million, £29 million less than in the first six months of 2020. It was the first decline since the second half of 2010.
UK equity income trusts made the biggest contribution to the drop in dividends as they are the largest category, but European-focused trusts also saw declines, Link Group said.
The firm stated that investment trust dividends always lag the wider market because they are paid from dividends distributed by companies held in the trusts.
The 3.1% decline in investment trust pay-outs was barely a blip compared to the broader dividend “wipe-out” over the course of the pandemic to date.
Between January 2020 and June this year, Link Group’s index of UK dividends fell by 34.6% on an underlying basis while global dividends were down 5.9%.
Ian Stokes, regional managing director, corporate markets at Link Group said: “Investment trust dividends cannot defy gravity, but they do come with a very plump cushion. Not only do they keep cash in reserve, but they can also bank some of the big capital gains they have made over the last year and hand these out to shareholders too.”
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