The latest to announce is Aberdeen Standard Equity Income Trust (ASEI), which has managed to marginally increase this year's dividend over last year.
I was struck by their comments in the final report, which can be found here:
https://www.investegate.co.uk/aberdeen- ... 00045366G/
A few quotes:
I am sorry that in my last report to you as Chairman I have to discuss what has been a most challenging year for our Company, whose portfolio has, for a second year in succession, produced a very disappointing result. Net Asset Value fell by 30.1%, much worse than the 19.2% fall in the FTSE All-Share Index, and also worse than nearly all our peers in the UK Equity Income peer group of investment trusts. In Total Return terms the comparison is similar, with our negative return of 25.7% worse than the index's 16.6%. Unlike last year, when we had an even poorer relative outcome in capital terms but earned enough to increase the dividend by 6.8% while adding £750,000 to revenue reserves, our dividend income suffered a decline of 26.3% as over half of our portfolio holdings either cut or eliminated their dividends from March onwards. Earnings per share were 15.61p, a decline of 28.2% from the previous year, substantially less than our dividend per share of 20.6p.
So the overall results have been poor, relative to the FTSE and IT peer group.
Our basic assumption has been that our shareholders are interested above all in the dividends they can expect from their investment in the Company, bearing in mind that the Company's stated objective is, and has always been since its launch in 1991, "To provide shareholders with an above average income from their equity investment, while also providing real growth in capital and income". It seems to us that today, when interest rates available on bank deposits are tiny to non-existent, and on government and corporate debt the lowest ever recorded, the high income the Company currently provides has never been more valuable.
Investors in ASEI want high yield, no surprise there then!
The conclusion of our discussions has been that for now we should carry on with the existing policy and management arrangements, utilising the revenue reserves which have been built up over the Company's almost 29 year life to maintain the dividend at its current level, and indeed, by making marginal increases, continue the now twenty year record of nominal increases, until dividends can again be covered by annual earnings. We expect that this position can be reached without exhausting revenue reserves given the combination of dividend reinstatements and portfolio adjustments made by the Manager designed to increase our revenues. If so, shareholders will have had an investment which has given them a yield of 6.9%, with the prospect of a rising dividend thereafter. In those circumstances, we would expect that the Company's shares would be trading at a significantly lower yield than today's, with a corresponding uplift in the share price having occurred.
They don't want to give up their 20 year record of increasing dividends.
Against that backdrop, and as suggested in the Company's Half Yearly Report to 31 March 2020, the Board announces a fourth interim dividend of 5.0 pence per share which will be paid on 30 December 2020 to shareholders on the Register on 4 December 2020, with an associated ex-dividend date of 3 December 2020. This takes the total dividend for the year to 20.6 per share, which is a 0.5% increase on the dividend in 2019 and the 20th consecutive annual dividend increase paid by the Company.
So the dividend increases again for the 20th consecutive year, by 0.5%.
I am sure that similar discussion have been held at many of the board meetings of equity income IT's, and probably all have reached similar conclusions.
If they are right, I think we can expect another year in 2021 of flat or slowly rising dividends from these type of IT's.
Good news for us investing for income types!
FD