VCT aggregate dividends reach all-time high

Ian Sayers, Chief Executive, Association of Investment Companies (AIC)

With this month marking the 20th anniversary since Venture Capital Trusts (VCTs) were created, figures from the Association of Investment Companies (AIC) show that the level of aggregate dividends is at its highest annual level since VCTs were established.

The VCT sector paid out aggregate dividends of £240.3 million (€334 million) over the year to 31 March 2015, compared to £231.1 million (€320 million) over the year to 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.”

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 (“asset base”) 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” (returning realised investment gains) to shareholders

The amount of dividends paid by the AIM focused VCT sector in the year to 31 March 2015 (at £21.7 million / € 30 million) is comparable with the year to 31 March 2014 (at £22.7m / €31.5 million), 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.