The figure that as a sector, investment trust dividends dropped by 3.1 percent in the first half of the year is ‘skewed’ or so claims brokerage Stifel.

The firm said that there has been much media coverage over the fact that trust dividends declined by 3.1 percent during the first half of 2021 although in reality ‘averages can conceal a lot of things’. 

Stifel said that in reality the vast majority of trusts have maintained or increased dividends although admitted a handful had cut their dividends, usually following the appointment of new portfolio managers and it is these trusts which have skewed the average number for the entire sector.

Conversely, Stifel claimed that the sector had done ‘a good job on dividends, with revenue reserves helpful’. The problem with the average number is it is heavily influenced by a small number of trusts in the UK Equity Income sector which had slashed their dividends. This should be expected given that last year around 40 percent of UK plcs dividends fell due to suspensions or reductions at least. However, even within the worst hit Equity Income sector, Stifel found that of the 21 constituents of that sector, 10 actually increased their distributions including Scottish Mortgage and F&C, while six have unchanged dividends.

Those reducing dividends were Edinburgh, Temple Bar and Troy Income & Growth, with all doing so after the appointment of new managers. All of these intend to start growing their dividends in future according to the broker.

“Overall, we think trusts have done a good job of delivering dividends, especially when compared to open-ended funds,” wrote Stifel in a report. It added that the use of revenue reserves has been very helpful, although this has meant that dividends uncovered by revenue EPS, have effectively been maintained through the payment of capital or NAV to shareholders.