F&C Investment Trust hikes dividend for 50th consecutive year

The global trust dipped into reserves to raise its dividend once again, increasing payouts by 4.3%. 

Despite a tough year for generating income, F&C Investment Trust (LSE: FCIT) has announced an increase in its dividend payment for the 2020 financial year, representing the 50th increase in a row.

The trust, a member of interactive investor's Super 60, also announced new plans to achieve a carbon-neutral portfolio by 2050.

In its latest results, the trust declared a final dividend of 3.4p per share, bringing the total dividend for the year to 12.1p per share. If approved by shareholders, this will represent a 4.3% increase on the prior year’s distribution.

In terms of the performance of its underlying investments, the trust slightly lagged its benchmark in 2020. Its net asset value (NAV) total return was 12.3% versus 12.4% for the FTSE All World Index.

Its share price total return was lower, at 4.3%. This was due to the shares moving from a premium rating at the beginning of the year to a 5.4% discount by the end of 2020.

The dividend increase is the 50th consecutive annual increase, meaning the trust has raised its dividend every year since 1970. The annual dividend payment will also be the 153rd the trust has paid throughout its long history.

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The trust noted that 2020 was a tough year for dividends as the pandemic led companies to cut income payouts at unprecedented levels. F&C Investment Trust noted that net revenue return per share fell to 9.71 pence per share, down from from 13.06 pence per share in 2019. This was the largest annual decline since 2009.

The trust, however, was able to increase its dividend payment by drawing on its revenue reserve. One of the key advantages of investment trusts is their ability to hold dividend income in reserve.

As a result, when dividend payments from companies dry up, as happened in 2020, they can draw on their accumulated reserves to maintain or even increase payments. Data released this week by the Association of Investment Companies (AIC) found that, in 2020, a total of 85% of income-paying trusts (with yields above 1%) increased or held dividends.

F&C Investment Trust noted that despite drawing on reserves, they still have plenty left in the bank, with one year’s worth of annual dividends available.  

Also notable was the announcement of the trust becoming carbon neutral by 2050. Last month, fund manager Jupiter also said that it will achieve net-zero emissions by 2050.

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Beatrice Hollond, chairman of the F&C Investment Trust, noted: “FCIT has been resilient, responsible and prosperous for over 150 years and we are pleased to announce our commitment to transition the portfolio to net-zero carbon emissions by 2050 at the latest. Our focus has always been on delivering sustainable growth in capital and income over the longer term. Shareholders can be assured that it will remain so.”

The trust said that it will closely monitor its progress on this and, if possible, reach the target sooner.