Hi, so here we go again and it is Friday already. Firstly an apology for no posts in the last couple of days. This was due to news flow being particularly dull in my view and I therefore lacked inspiration to write anything worthy of your attention.Today I have something to write about which is perhaps dull and therefore maybe sits well with this weeks news?
I say dull because it is an Investment Trust idea which long term readers will know is a sector I like to use where it can bring access to asset classes or markets which I cannot or do not wish to access directly. I also like their ability to gear, generally low charges and their ability to smooth dividend payments via the use of revenue reserves and more recently from capital.
So the trust I wish to highlight for you today brings a global approach to buying yield stocks for income and growth which is benchmarked against the MSCI World High Dividend Yield index. Having said that though this one does not closet track that index as it is a focussed portfolio of 40 to 50 stocks. The trust is called the Securities Trust of Scotland (STS), which is managed by Martin Currie and their manager Alan Porter, click the name to visit the dedicated site which includes a compelling interview with the manager about his approach plus research reports, facts sheets and the annual report.
In their recent results to March 2015 they increased their 4th quarterly dividend to 1.45p and they have committed to paying this level of dividend for each quarter for their next financial year which will give a total of 5.8p for a yield of 4.3% at the current price of 137.5p. This is supported by revenue reserves of around 40 to 50% of the full year dividend and the ability to pay out of capital. Indeed beyond this year the chairman says:
"The aim is that the annual dividend will be progressive thereafter, in line with the investment objective of delivering
rising income as well as long-term capital growth."
In addition as is often the case with Investment Trusts, but unusual in this sector recently, this one also trades on a discount of around 5% to 6% to its recent Net Asset Value which is around 146p. In common with other investment trusts it has some borrowings which provide gearing of just under 10% currently and has a management charge of 0.6% per annum with ongoing charges of 1% overall. Performance has lagged the benchmark slightly in the last couple of years, but longer term they have done well and beaten it and indeed within the Global Equity income sector it is one of the best performers over five years.
So I like it as a way of getting an actively managed portfolio of international yield stocks at a reasonable cost together with some modest gearing and a decent yield to boot. The recent dull relative performance and maybe investors turning more cautious as equity markets have climbed has perhaps provided an opportunity to pick up a decent international yield portfolio at a discount.
There you go I told you it was a dull end to a dull week. As a result though I have been watching and listening to a few interesting bits and pieces this week - so if I can work up the enthusiasm I might try and do a weekend post for you with a round up of those. Failing that have a great weekend and hopefully we might have a more interesting week next week, although given the Greek situation and with the old saying in mind, perhaps I should be careful what I wish for?