For income-focused investors, a change to a trust's dividend policy is big news. The Finsbury Growth and Income Trust has just announced significant changes designed to reward shareholders. 

A much bigger dividend

The headline change is a major increase in the dividend. From October 2026, the trust's annual payout will rise by at least 50% from around 20p per share to about 30p per share.

For shareholders, that means more income from the same number of shares. It also lifts the trust's yield (the income as a percentage of the share price) from roughly 2.6% to around 3.9%. That brings it broadly into line with other trusts in the UK equity income sector, where it had previously offered less.

Quarterly, not twice a year

The trust is also changing how often it pays. Previously, it paid dividends twice a year. Under the new policy, it will pay four times a year (quarterly).

This is a practical improvement for income investors, especially those who rely on their investments for regular cash flow. Quarterly payments are smoother and more predictable, and they match what most equity income trusts already do.

Why now?

The changes come after a tough period for the Finsbury Growth & Income Trust, which underperformed the wider market. The board, led by chairman Pars Purewal, pledged to do "whatever it takes" to improve shareholder returns and a more generous, more frequent dividend is part of that promise.

It is a way of rewarding loyal shareholders directly, while the manager waits for the trust's out-of-favour holdings to recover.

More borrowing to fund growth

Alongside the dividend, the board is changing its approach to borrowing (known as "gearing"). Investment trusts can borrow money to invest more, which can boost returns when markets rise.

The trust had been cautious, using only a small part of its £100 million borrowing facility. Now it plans to use much more of it, reflecting the board's belief that UK shares are particularly cheap right now.

It's important to understand the trade-off: borrowing can amplify gains, but it also amplifies losses. For an already concentrated portfolio, this raises the risk level  something income investors should weigh carefully.