Interactive Investor

Is it good news that 50% of trusts now pay quarterly dividends?

23rd February 2018 11:38

Tom Bailey from interactive investor

Half of all investment companies now pay dividends on a quarterly basis, according to new research by the Association of Investment Companies. This is part of an increased trend towards quarterly payments. In 2016, 43% of investment companies paid dividends quarterly, rising to 46% in 2017.

The move to quarterly payments has come at the expense of tri-annual and bi-annual dividend payments.

There are now no longer any investment companies that pay out dividends three times a year, following the move by European Assets - the only trust to do so previously - onto a quarterly payment basis.

Bi-annual payments have also declined in number this year. The number of investment companies paying out bi-annually has fallen by two percentage points to 26%. One in five investment companies continues to pay an annual dividend, while just eight pay monthly dividends.

This move towards quarterly dividend payments at the expense of tri- or bi-annual payments is being driven by the increasing search for income among investors as they reach retirement age.

"This has been a growing trend in the industry," notes Adrian Lowcock, investment director at Architas. He points out that as more people reach retirement, more are taking the income. Quarterly payments give investors a more consistent income and allow investment companies to 'smooth over' payouts.

"Most listed stocks pay an interim and annual dividend," mentions one expert. "So where investment companies that hold equity portfolios are paying out quarterly, this is simply a case of smoothing out the distribution schedule."

However, he adds, while "a more regular pay-out profile is possibly welcome for those investors who choose to draw an income," it may come at the expense of investors less focused on income and wishing to reinvest their dividends.

In addition: "many investors choose to reinvest dividends and therefore the regularity of pay-outs is not an issue; more frequent distributions could, potentially, create additional costs, depending on whether their broker charges dealing fees for dividend reinvestment."

This article was originally published in our sister magazine Money Observer, which ceased publication in August 2020.

These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

These articles are provided for information purposes only.  Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties.  The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.

Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.

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