United Kingdom

SCOTTISH AMERICAN INVESTMENT: Trust keeps its dividend

Last year was dismal for anyone seeking an income from their investments. 

Dividends from UK companies plunged by 38 per cent, according to the Link Group Dividend Monitor. Global pay outs were down 12.2 per cent, Janus Henderson’s Global Dividend Index shows.

So against this difficult backdrop, it is particularly impressive that Scottish American Investment Trust increased its dividend payout above the rate of inflation for the 47th consecutive year.

Scottish American Investment Trust increased its dividend pay out above the rate of inflation for the 47th consecutive year

The fund’s current yield is 2.49 per cent. Inflation as measured by the Consumer Price Index (CPI) is just 0.4 per cent.

The £803million trust searches the globe for companies with the greatest potential for paying out an income.

‘We’re invested in companies on every continent,’ says Toby Ross, who co-manages the fund with James Dow. The fund, known by the acronym Saints, invests in a concentrated portfolio of 50 to 100 companies.

It is supported by a team at the fund house Baillie Gifford, which has run it since 2004.

The portfolio is a world away from conventional income funds. For one thing, it largely shuns oil companies and banks – sectors traditionally relied on for high dividends. 

Instead, Ross, Dow and their team concentrate on companies that may not pay the highest dividends today, but that they believe have a strong chance to do so in the future.

Its top holdings are a mixed bunch, ranging from a semiconductor manufacturer to an Australian healthcare provider, Sonic Healthcare, to US courier UPS

As a result, its top holdings are a mixed bunch, ranging from a semiconductor manufacturer, Taiwan Semiconductor Manufacturing, to an Australian healthcare provider, Sonic Healthcare, to US courier UPS.

‘We look for those that we think will be the biggest payers in five or ten years,’ says Ross. ‘We want companies that will pay dividends as they grow.’

Ross is particularly excited about Novo Nordisk, which is pioneering a new generation of anti-obesity drugs. 

‘It is astoundingly effective,’ he says. ‘It is a long road ahead, but it is possible that in five or ten years, it will be the standard treatment for obesity.’ 

He also has high hopes for Albemarle, which is a leading producer of lithium, an essential commodity for building electric vehicles. As we transition to a low-carbon economy, supplies of lithium will be crucial.

Ross believes the global remit of Saints was key to finding income throughout the pandemic.

‘Asian and US companies proved more resilient that UK companies,’ he says. ‘Asia in particular bounced back faster than most Western countries. Chinese furniture maker Man Wah and sportswear company Anta Sports have done particularly well.’

While nine out of the UK’s ten biggest dividend payers cut or failed to grow their dividends over the past five years, nine in ten of Saint’s top holdings grew theirs.

Saints will celebrate its 150th birthday in 2023. Yet, Ross is adamant he is looking forwards not backwards. ‘We’re looking for companies that will be on the right side of history,’ he says. ‘We think they are likely to be in technology, next generation healthcare and gaming,’ he adds.

Chris Salih, investment trust research analyst at scrutineer FundCalibre, believes Saints is one of the most consistent trusts in the global equity income sector. 

He says: ‘Performance has been strong over the past five years, with the trust returning 109 per cent to investors, compared with 85 per cent for the average trust in the Investment Association Investment Trust Global Equity Income sector.’

The trust’s ongoing charge is 0.7 per cent a year and the stock market identification code is 0787369. 

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