Three decades of real dividend growth: Schroder Income Growth

Schroder Income Growth (SCF) has been delivering real Dividend growth since 1996, compounding its dividend at 4.1% annually against average inflation of 2.5%. Whilst that record predates Sue Noffke’s tenure, her investment process has been central to sustaining it since she became lead manager in July 2011. By targeting mispriced opportunities across the market, specifically companies with strong balance sheets, sustainable profitability and consistent cash generation, Sue looks beyond simply chasing yield, assessing the full picture of shareholder returns, encompassing dividends, share buybacks, and capital growth potential. That approach has proved its worth through difficult periods, including the pandemic, when many income funds were forced to cut. The board has also signalled its intention to pursue a 31st consecutive year of dividend growth in FY26.

Sue has been active over the period, increasing thePortfolio’s exposure to basic materials, initiating two new positions in Glencore and Weir, reflecting conviction in medium term commodity supply-demand dynamics and the energy transition. Healthcare was also added to via GlaxoSmithKline and a new position in Reckitt Benckiser. Meanwhile, Sue added to RELX, arguing that its analytics tools are more resilient to AI disruption than the market has priced in.

In Performance terms, SCF delivered a NAV total return of 14.9% over the past year, to 20/07/2026, supported by strong returns from Rio Tinto and SSE. The UK market performed even better, however, with the FTSE All-Share climbing 19.6%, with SCF’s above-index exposure to small- and mid-cap stocks acting as a drag on relative returns. That same dynamic has weighed on five-year numbers too, though the trust remains ahead by nearly 27 percentage points under Sue’s full tenure.

At the time of writing, SCF trades at a 5.7% Discount, in line with its five-year average.

SCF’s 30-year dividend growth record is, in our view, the trust’s most compelling characteristic, and one that is easy to underappreciate in a market environment where short-term noise dominates. Sue’s process has been central to sustaining that record, and the discipline with which she has managed the portfolio through very different market environments, without anchoring to a single style or chasing unsustainable yields, gives us confidence that the income profile remains on a solid footing. The board’s intention to pursue a 31st consecutive year of dividend growth, backed by healthy reserves and robust portfolio income, reinforces that view.

The activity over the period also speaks to a manager with conviction. We think that the deliberate build-up in basic materials exposure, the considered distinction between RELX and Pearson on AI resilience, and the recycling of profits from strong performers into areas of better long-term value all reflect an active, thoughtful approach rather than index-hugging.

There are risks worth acknowledging. The Middle-East conflict has introduced genuine uncertainty around the inflation and rates outlook, which could weigh on sentiment towards equity income investment trusts, as we saw in 2022/23. Further, SCF’s above-index small- and mid-cap exposure remains a potential headwind if domestic sentiment stays cautious.

That said, we think the current picture is encouraging. The portfolio’s defensive sector tilts provide near-term resilience, and small- and mid-cap valuations, which sit at historically wide discounts, could prove a meaningful return driver in time. Additionally, with a strong long-run record under Sue, a 4.1% yield and three decades of above-inflation dividend growth, we think SCF presents a compelling case for both income and total-return investors seeking UK exposure.