The trust with ‘moats’ to guard its 8% returns
INVESTMENT trust Murray International is a conservatively run fund. No holding is allowed to represent more than five per cent of the portfolio, investments are chosen from across the globe, and the emphasis is as much on providing shareholders with a healthy stream of dividends as it is on generating capital. Bonds as well as equities form part of the trust’s £1.7billion of assets.
The result is a fund that has 15 years of dividend growth behind it, provides a healthy annual income of 4.5 per cent, and pays it out every quarter – regular as clockwork.
Although the trust’s overall performance may look a little anaemic when compared to rival global equity income funds, manager Bruce Stout believes his formula is ideal for incomefocused investors. No other global equity income trust provides a higher income.
‘I can’t overemphasise the importance of the trust’s income and its growth year in, year out to our shareholders, most of whom are private investors,’ says Stout. ‘It is every bit as important as the growth in the value of their investments.’
Stout currently holds 50 stocks in the portfolio – all are listed with no exposure to private equity or property. The businesses are spread across 25 countries, ranging from embryonic markets such as Mexico and Indonesia to established stock markets such as the UK and US.
Many of the companies have been in the portfolio for 15 years or more – the likes of Taiwan Semiconductor and Mexican airport operator Grupo Aeroportuario del Sureste (commonly known as Asur).
Stout likes companies that have so-called ‘moats’ built around them – barriers to entry that make it difficult for competitors to muscle in. ‘Asur is a great company,’ he says. ‘I’ve held it in the trust for 20odd years and it delivers an attractive dividend – occasionally an additional special dividend when things are going extremely well. Yes, the shares can go to sleep for a year, but it doesn’t detract from the fact that it’s a good business deriving rents and royalties from retailers and its airport car parks. And in terms of “moats”, no one is going to build another airport in the Mexican tourist hotspot of Cancun where it operates one of the most successful of its nine airports.’
Taiwan Semiconductor’s ‘moat’, says Stout, is the massive capital required to compete in the production of semiconductor devices that in Taiwan’s case end up in Apple iPhones.
Other key dividend-friendly stocks include tobacco giants BAT and Philip Morris – and Unilever Indonesia which is benefiting from a young population with income to spend. Stout also holds a smattering of more growth oriented stocks – the likes of Intel and Auckland International Airport – that do not throw off the dividends other holdings do. These are countered by a portfolio of emerging market bonds that produce an income in the region of 8 per cent a year. ‘This trust dances to a different beat than most other global funds,’ he adds. ‘It doesn’t have the technology bent of some which means our performance can sometimes look inferior when the market narrows and focuses on tech stocks. Equally, the trust doesn’t hit turbulence when the tech market quickly unwinds as it did late last year. Our modus operandi is building a portfolio of diversified businesses that have their own individual characteristics.’
Murray International, run by Stout out of Edinburgh, is part of combine Aberdeen Standard Investments. Its annual charges are just short of 0.7 per cent.