Investment trusts optimistic on income in 2012, AIC finds

Next year could be an opportune time for income investing despite persistent uncertainty on the global economic stage, the Association of Investment Companies’ (AIC’s) latest poll suggests.

James Henderson, manager of the £398.8m Law Debenture Corporation, the £203.4m Lowland Investment Company and the £27.8m Henderson Opportunities Trust, predicts businesses could be poised to grow their dividends in 2012.

“Investors could be surprised by the level of dividend growth next year – this is fuelled by strong cash generation and balance sheets that are much improved since 2008,” Henderson explains.

“Dividend growth for 2012 could be as much as 10%.”

Alan Porter, manager of the £113.3m Securities Trust of Scotland, adds that income funds are broadly optimistic in their outlook for next year, even though the economic backdrop remains negative.

He says: “Company balance sheets are strong and firms are taking a more positive attitude to returning cash to shareholders in the form of increased dividends and share buybacks.

“Valuations, particularly among larger companies, are also beginning to look attractive.”

The AIC’s poll shows that 62% of managers expect the eurozone debt crisis to remain the single largest threat to equities next year, while just 33% are as concerned by the prospect of a global recession.

Sam Cosh, manager of the £81.7m European Assets Trust, says the debt crisis is one of the main reasons that allocations to equities remain low. But he reminds managers that pockets of good news and attractive valuations should not be ignored.

“Clearly a collapse of the euro would create further volatility, however any incremental good news should be taken very positively given the negative sentiment in the market,” Cosh says.

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