Venture capital trust dividends soar to new high on their 20th anniversary

Otmane El Rhazi from Mindful Money » Shares.

On the 20th anniversary of the creation of Venture Capital Trusts (VCTs) figures from trade body the Association of Investment Companies (AIC) highlight that dividends across the asset class are at their highest-ever annual level.

AIC data shows the VCT sector paid out aggregate dividends of £240.3m over the year to 31 March 2015, compared to £231.1m over the year to 31 March 2014.

The average VCT is currently paying an average yield of 8.2%, with the average generalist VCT yielding 8.8% and the average AIM VCT yielding 5.6%.

The level of aggregate dividends continued to be dominated by generalist VCTs focused on private equity and development capital due to:

• A larger amount of funds being managed by the sector from which dividends are being paid
• An increase in the number of VCTs seeking to pay annual dividends of circa 5p per share
• A number of VCTs paying “special dividends” to shareholders

The amount of dividends paid by the AIM focused VCT sector in the year to 31 March 2015, at £21.7m, is comparable with the year to 31 March 2014, at £22.7m, when taking into account that there is a reduced number of AIM focused VCTs in existence at 31 March 2015 compared with at 31 March 2014.

Ian Sayers, chief executive, AIC, said: “It’s been a good year for the VCT sector, with strong fundraising for the 2014/15 tax year and funds under management at a record high.  As the sector has matured, it is encouraging to see so many VCTs offering consistent and attractive yields.  The companies VCTs invest in start small, and as such are high risk, but the tax advantages on offer can be appealing for investors willing to accept the risks. The increase in average dividends paid is one of many reasons why income hungry investors might want to consider VCTs as part of a balanced portfolio.”