Managers praise seeds of success as trust lifts dividend for 42 years
I INVESTMENT income remains keenly sought after while i interest rates st stay glued to the floo floor – and this month will see the t first dividend di id d payment for investors who moved quickly to secure shares in Royal Mail last year.
But there is a band of investors with more reason to be smug than backers of the postal service.
They are shareholders in The Brunner Investment Trust – who have not only received 42 years of dividend payments, but have enjoyed a rising dividend over the same period.
Managers Lucy Macdonald and Jeremy Thomas say the trust’s ability to keep generating income boils down to a mixed recipe.
First, they point to healthy cash reserves so the board can continue to award dividends even if performance dips. Second, they praise the solid research afforded by Grassroots, a division of the trust’s parent company Allianz.
Last, they claim success comes from active management, where they pick well financed businesses with a competitive advantage.
Thomas says: ‘We have to be sure that the dividend is sustainable, that a company can afford it and is able to grow it.
‘It can be a challenge, but because we are active managers we can go and look for those sorts of companies.’ One of the opportunities the managers allude to is Monsanto, the US agrochemical giant and producer of genetically engineered seeds.
Others in its global portfolio include mobile network giant Vodafone, and oil and gas heavyweights BP and Royal Dutch Shell.
But top contributors to the trust’s recent performance include Intercontinental Hotels and Astellas Pharma, which makes a drug used to treat prostate cancer.
The trust aims to beat the total returns of the FTSE All-Share and FTSE World Index (excluding UK) – something it has done comfortably over the past year.
But despite a solid performance, the managers expect market returns to weaken slightly in future, believing that equity markets have seen the best of government policy changes, recovery and reduced risk.
Yet they believe they can keep up the dividend’s momentum. ‘The board is unlikely to raise the dividend income too far and too fast, so there is no reason why we shouldn’t be able to continue to grow it each year,’ Thomas says.