Here we explore how this approach benefits those needing an income from their investments and highlight the trusts that have been dubbed ‘dividend heroes’.

A dividend hero is an investment company that has consistently increased its dividends for at least 20 consecutive years. Twenty trusts now boast this impressive track record, according to data compiled by the Association of Investment Companies (AIC).

Some names on this list have been increasing dividends for more than half a century. This means rising payouts every year since the 1960s! In addition, there are just over 30 more trusts that have been delivering consistently rising dividends for at least a decade.

First, a quick recap of investment trusts

Investment trusts pool clients’ money to buy a wide variety of assets, depending on their aims and objectives. These products, also known as investment companies, are listed and traded on global stock markets in the same way as the shares of individual companies. They are referred to as being closed-ended, which means they only have a fixed number of shares in issue at any one time. This makes long-term investment decisions easier; the managers don’t have to base buy/sell decisions on money moving in or out of the fund.

How they smooth out returns

The key quality of trusts that we’re focusing on in this article is their ability to smooth out returns to their investors. As we have already mentioned, this is achieved by holding back up to 15% of the dividend income generated during the good years to pay out when times are tougher. This is called a revenue reserve.

The obvious benefit to investors is that they have a better chance of receiving decent – and often rising – dividends, regardless of the economic or market backdrop. Of course, it’s important to remember that dividends are never guaranteed, even if you’ve invested with a trust that has been performing well for decades.

Five dividend heroes worth highlighting

There’s certainly plenty of choice when it comes to investment trusts with long track records of delivering rising dividends to investors. To help narrow down your options, we have highlighted five trusts with experienced management teams that could be worth considering.

The City of London Investment Trust – 58 consecutive years of rising dividends

This trust was launched back in 1891, which makes it one of the longest-running investment trusts in the UK. It has also increased the dividend it’s paid for 58 consecutive years. The aim of the trust, which has been run by Job Curtis for more than three decades, is to provide growth in income and capital by investing mainly in larger UK companies. We like how the trust has generated steady returns over a long time and believe it makes an excellent core option for anyone wanting UK equity income exposure.

The Global Smaller Companies Trust – 54 consecutive years of rising dividends

Investing in smaller companies from around the world is the aim of this trust, which is run by Nish Patel. His focus is on finding hidden gems at attractive prices. The concept driving this portfolio is that smaller companies have traditionally outperformed their larger-cap cousins over the longer term. While investors need to be aware of the increased risks of smaller companies, we believe this trust could be an excellent option for anyone wanting exposure to this part of the market.

Murray Income Trust – 51 consecutive years of rising dividends

The aim of this conservatively managed trust is to build a portfolio of high-quality companies that deliver a resilient income, as well as strong capital growth prospects. We see this trust, which was founded in 1923, as a dependable, diversified and differentiated trust that’s delivered consistently strong performance during challenging times for UK equities.

Scottish Mortgage Investment Trust – 42 consecutive years of rising dividends

This is a trust with a misleading name. The fact is that it has nothing to do with mortgages and no particular focus on Scottish investments. It’s name is purely historic, as it dates to 1909. The aim of the trust is to maximise total returns over the long term by owning some of the world’s most exceptional growth companies. Although the fact that this trust can have up to 30% in unlisted companies makes it inappropriate for lower risk investors, we like its focus on finding tomorrow’s winners.

TR Property Investment Trust – 14 consecutive years of rising dividends

Our final suggestion invests in the shares of property companies that are typically based in the UK or across Europe. Its manager, Marcus Phayre-Mudge, is vastly experienced in this sector and benefits from having the backup of a well-resourced and dedicated team. He looks for businesses that have exposure to a diversified variety of areas, including retail space, office accommodation and industrial sites.