21st April 2015
The UK equity income sector has delivered 4.82% annual dividend growth, the latest figures from the Association of Investment Companies reveal.
Over the past 20 years the income paid out on a £100,000 investment totals £130,071.
Data from the AIC using Morningstar shows that £100,000 invested into the average UK Equity Income investment company on 28 February 1995 would have generated an initial average annual income of £3,824 by 28 February 1996, which would have grown to an average annual income of £9,344 by 28 February 2015.
Annual dividend growth was 4.82%, some 2% ahead of inflation (annualised RPI inflation over the period is 2.84%). Over twenty years investors would have received £130,071 of income from this portfolio.
Meanwhile, in addition to the income generated, the capital value of the investment would have grown to £260,259 – an increase of 160%. This is 38 percentage points higher than when the AIC last ran this data in August, with the recent FTSE gains no doubt playing a significant role here, and highlighting just what a difference a few months can make and how perilous trying to time the market can be.
Nick Britton, head of training at the Association of Investment Companies, says: “Investment companies in the UK Equity Income sector have not only provided their shareholders with a dependable income stream rising faster than inflation, they’ve also managed to turn £100,000 into over £260,000 over twenty years, even after all the income is taken out. Investment companies are not a substitute for an annuity, both your income and capital are at risk and if you are in any doubt you should consult a financial adviser. But these figures make a compelling reason for investors to consider investment companies as part of a well-balanced retirement portfolio.”