Investing for Income and Growth
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
The power of compounding dividends
Dividends are an important part of the total return from your investments. If you have a portfolio of shares worth £10,000, paying annual dividends of 3%, and you reinvest those dividends to buy new shares over 10 years, they will earn £300 in year one.1 Ignoring any share price appreciation, the investment would grow to £10,300. If the dividend grew at 3% again the next year, the investment would earn £309, and the investment would be worth £10,609. After 10 years, dividend increases alone would have raised that initial investment to £13,493.2 even if there is no appreciation in the share price.
Reinvesting dividends
Over time, dividends have been a powerful part of the overall returns from stock market investing, particularly in certain markets. It is worth noting that since the turn of the century, the return to investors from the FTSE 100 is around 8x higher if reinvested dividends are added in.3 The price return is the increase in the level of the index, while total return takes in dividends as well. Reinvesting dividends to buy more of a particular investment can be a powerful way to harness the power of compounding.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Why dividend growth is important?
Another important contributor to equity market returns historically has been dividend growth. Companies can grow their revenues, profits and earnings over time, and this could allow them to make higher dividend payments to shareholders. This is in contrast to the interest income from cash or fixed income, which, for the most part, is static and does not grow with inflation. Inflation can be corrosive for long-term savings. £10,000 invested in January 2006 would have had to grow to £21,270 by January 2026 just to have the same purchasing power.4
Balancing investing for income and growth
Dividends are important, but there are some nuances. The dividend yield is expressed as a percentage of the share price. Therefore, if the share price falls, the dividend yield will rise – a company with shares trading at £50, with a £2.50 dividend has a yield of 5%, but if the shares drop to £40, that £2.50 dividend is equivalent to a yield of 6.25%. Very high yields can be a sign that the market is worried about the company and believes it may cut its dividend in future. By looking at a company’s growth prospects alongside its dividend yield, investors may be able to determine whether a dividend is sustainable.
Maximising an income and growth investment strategy
An income and growth strategy aims to deliver two outcomes from your investments: regular income and long-term capital growth. This approach is commonly used by investors who want dependable income today while still growing the value of their portfolio over time. Successfully investing for income and growth requires understanding how dividends contribute to returns, how compounding works over the long term, and how changing market conditions can affect both income levels and capital value.
Why investing for income and growth delivers
Dividends can be an important discipline for a company. These companies will still have risks, and dividends are not guaranteed, but if companies have strong enough cash flow to pay a dividend, it can be an indication of stability. Equally, if companies are committed to paying a dividend, it could mean they are not engaging in risky acquisitions, or exploring speculative new product lines. Dividend payments tend to be a feature of mature businesses with predictable earnings and cash flow, which may be lower risk investments.
Are Dividends guaranteed?
It is important to note that dividends are not guaranteed. Sometimes companies are forced to cut their dividend or pass on them altogether, because their profits or cash flows cannot sustain their payouts. Indeed, in challenging economic conditions – such as those seen during the global financial crisis or the Covid pandemic – the aggregate level of dividends across an entire market may decline.
This comes into its own in times of higher inflation and it is one of the main reasons equities have historically done well through inflationary periods such as the 1970s.5
Income and Growth Investment Trusts
Discover the BlackRock Income and Growth Investment Trusts series – a selection of our investment trusts for growth and income, designed to navigate the dynamic world of investment opportunities.
This is why investing for income can bring some stability to investment returns. Investors know that if a company continues to make profits, part of their return may come back to them as a dividend.
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Targeting long-term capital growth while paying an attractive level of income, this Trust aims to deliver risk-controlled consistent returns by using a systematic investing approach combining the power of big data, artificial intelligence and human expertise.
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The BlackRock Energy and Resources Investment Trust (BERI) aims to provide long-term total returns to shareholders by investing in the mining and energy sectors.
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Targeting capital growth, the BlackRock Frontiers Investment Trust focuses on the world’s most dynamic countries, investing in a carefully curated selection of businesses in the economies of tomorrow.
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Targeting capital growth, the BlackRock Greater Europe trust (BRGE) invests across small and large companies in the region. The Trust’s experienced management team focus on identifying high quality companies that can be held for the long term.
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The trust targets growing income and capital returns, through the economic cycle. It is a high conviction portfolio, focused on UK companies generating high cash flow.
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The Trust builds a carefully selected portfolio of Latin America’s most compelling investment opportunities with the aim of delivering long-term income and capital growth.
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Targeting long-term capital growth, this trust seeks out the fastest growing, most innovative and exciting companies from the UK small cap universe.
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This high-conviction portfolio seeks to invest in the UK’s most differentiated and exciting emerging companies, with quality management teams, and dominant market positions.
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Targeting income and capital growth, the BlackRock World Mining Trust (BRWM) provides a diversified blend of companies designed to benefit from the changing global economy.
1 Dividend Data - FTSE 100 Index Dividend Yield - 3.49% - 13 February 2026
2 This is Money - Monthly lump sum savings calculator - 13 February 2026
3 IFA Magazine - FTSE 100 celebrates 40th birthday - but is it over the hill? - January 2024
4 Hargreaves Lansdown - Inflation calculator - 13 February 2026
5 Macrotrends - Dow Jones - 100 Year Historical Chart - 16 February 2026
Risk Warnings
Capital at risk. The value of investments and the income from them can fall as well as rise and are not guaranteed. Investors may not get back the amount originally invested.
Past performance is not a reliable indicator of current or future results and should not be the sole factor of consideration when selecting a product or strategy.
Changes in the rates of exchange between currencies may cause the value of investments to diminish or increase. Fluctuation may be particularly marked in the case of a higher volatility fund and the value of an investment may fall suddenly and substantially. Levels and basis of taxation may change from time to time and depend on personal individual circumstances.
Fund-specific risks
BlackRock Energy and Resources Income Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Gearing Risk, Investments in Mining Securities
BlackRock World Mining Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Gearing Risk, Gold / Mining Funds
BlackRock Frontiers Investment Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Frontier Markets, Gearing Risk
BlackRock Greater Europe Investment Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Gearing Risk, Liquidity Risk
BlackRock Income and Growth Investment Trust plc
Counterparty Risk, Gearing Risk, Liquidity Risk
BlackRock Smaller Companies Trust plc
Counterparty Risk, Gearing Risk, Liquidity Risk, Smaller Companies
BlackRock Throgmorton Trust plc
Complex Derivative Strategies, Counterparty Risk, Gearing Risk, Liquidity Risk
BlackRock American Income Trust plc
Capital Growth / Income Variation, Currency Risk, Derivative Risk (Derivatives, Options, Covered calls), Derivative Risk, Gearing Risk, Investment Trust Disclaimers
BlackRock Latin American Investment Trust plc
Counterparty Risk, Currency Risk, Emerging Markets, Gearing Risk
Description of Fund Risks
Capital Growth / Income Variation: Investors in the Fund should understand that capital growth is not a priority and values may fluctuate and the level of income may vary from time to time and is not guaranteed.
Complex Derivative Strategies: Derivatives may be used substantially for complex investment strategies. These include the creation of short positions where the Investment Manager artificially sells an investment it does not physically own.
Derivatives can also be used to generate exposure to investments greater than the net asset value of the fund / investment trust. Investment Managers refer to this practice as obtaining market leverage or gearing. As a result, a small positive or negative movement in stockmarkets will have a larger impact on the value of these derivatives than owning the physical investments. The use of derivatives in this manner may have the effect of increasing the overall risk profile of the Funds
Counterparty Risk: The insolvency of any institutions providing services such as safekeeping of assets or acting as counterparty to derivatives or other instruments, may expose the Fund to financial loss.
Currency Risk: The Fund invests in other currencies. Changes in exchange rates will therefore affect the value of the investment.
Derivative Risk: Derivatives may be highly sensitive to changes in the value of the asset on which they are based and can increase the size of losses and gains, resulting in greater fluctuations in the value of the Fund. The impact to the Fund can be greater where derivatives are used in an extensive or complex way.
Derivative Risk (Derivatives, Options, Covered calls): The Fund uses derivatives as part of its investment strategy. Compared to a fund which only invests in traditional instruments such as stocks and bonds, derivatives are potentially subject to a higher level of risk.
Emerging Markets: Emerging markets are generally more sensitive to economic and political conditions than developed markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund.
Frontier Markets: Frontier markets are generally more sensitive to economic and political conditions than developed and emerging markets. Other factors include greater 'Liquidity Risk', restrictions on investment or transfer of assets and failed/delayed delivery of securities or payments to the Fund. There may be larger fluctuations to the value of your investment and increased risk of losing your capital.
Gearing Risk: Investment strategies, such as borrowing, used by the Trust can result in even larger losses suffered when the value of the underlying investments fall.
Gold / Mining Funds: Mining shares typically experience above average volatility when compared to other investments. Trends which occur within the general equity market may not be mirrored within mining securities.
Investments in Mining Securities: Investments in mining securities are subject to sector-specific risks which include environmental concerns, government policy, supply concerns and taxation. The variation in returns from mining securities is typically above average compared to other equity securities.
Investment Trust Disclaimers: Net Asset Value (NAV) performance is not the same as share price performance, and shareholders may realise returns that are lower or higher than NAV performance.
Liquidity Risk: The Fund's investments may have low liquidity which often causes the value of these investments to be less predictable. In extreme cases, the Fund may not be able to realise the investment at the latest market price or at a price considered fair.
Smaller Companies: Shares in smaller companies typically trade in less volume and experience greater price variations than larger companies.
