Though dividends are never guaranteed, investment trusts can make passive income much more reliable. The UK is home to many top trusts with long records of unbroken dividend growth. Their secret? Holding a wide range of stocks and other securities that generate dependable income streams.
Take City of London Investment Trust (LSE:CTY), Alliance Witan (LSE:ALW), and Scottish Mortgage Investment Trust (LSE:SMT). Collectively, these trusts have raised dividends every year for 161 years. But what makes them specifically such impressive income generators?
City of London – 59 years of dividend growth
City of London Investment Trust has grown dividends every year since the mid-1960s. How? By focusing on UK blue-chip shares, which themselves have some of the best dividend records on the planet.
In total, this trust owns shares in 78 companies, of which its largest holdings include HSBC, BAE Systems, Unilever, and Shell. As this list shows, these are companies with diverse revenue streams, robust balance sheets, and market-leading positions, all of which lead to reliable dividends over time.
By far, City of London’s largest exposure is to financial services. Around 33% of it is tied up in this sector, which can make returns a little more vulnerable during economic downturns. Still, this hasn’t derailed the trust’s progressive dividend policy yet.
The forward dividend yield here is 3.8%.
Alliance Witan – 59 years of dividend growth
Alliance Witan also has almost six decades of consistent dividend growth under its belt. Like City of London, it is also well diversified by sector, with exposure to financials, IT, healthcare, telecoms, and consumer goods among others.
In fact, it holds shares in 229 different companies. And what I especially like is that these can be found all over the globe, including the UK, Europe, Asia, and the US. A higher weighting towards New York-listed shares (66% of the portfolio) does create more concentration risk than a more equally distributed portfolio, however.
The forward dividend yield is a handy rather than spectacular 2.2%, which reflects a high concentration of growth shares like Microsoft and Nvidia. However, that focus on dividend growers over high yielders means investors have enjoyed strong share price gains alongside a rising passive income.
Scottish Mortgage – 43 years of dividend growth
Scottish Mortgage Investment Trust also allows investors to enjoy the best of both worlds. Annual dividends have risen every year for almost half a century. Meanwhile, its share price has risen at an average yearly rate of 18.7%.
It’s been able to achieve this by focusing on high-growth technology shares, 102 in total. It has holdings in both private and publicly listed companies like SpaceX, TSMC, Amazon, and Meta, allowing it to harness white-hot tech trends including AI, e-commerce, and robotics.
Can it continue delivering? I’m confident it can as the digital revolution rolls on. Remember, though, that its focus on one sector creates some additional risk. The forward dividend yield here is 0.4%.
