The investment trust has stakes in quality companies and big names going cheap
Thursday 28 Feb 2019 Author: Tom Sieber

We think the generous and growing income on offer from Murray Income Trust (MUT) coupled with its focus on quality companies at an attractive price will prove a winner with investors.

The investment trust offers a dividend yield of 4.3% and has grown its dividend in every one of the last 45 years. Like all closed-end funds, Murray can hold back cash to act as a buffer if its underlying investments cut their own payouts. It has around 98% of the total annual dividends paid in the last financial year in reserve.

Canaccord Genuity analyst Alan Brierley notes that over three years the trust ranks tenth out of 104 funds by net asset value (NAV) total return within an UK equity income investment trust and mutual fund peer group.

Brierley adds: ‘We are encouraged by the sharp recovery in performance in recent months, although the key for the company now is to build on these foundations and re-establish itself as a core holding for UK equity investors.’

Increasing its status among the peer group could help narrow the current discount to NAV which stands at 7.8%.

A REINFORCED TEAM

Murray’s chairman Neil Rogan noted alongside results for the six months to 31 December 2018 that the Aberdeen Asset Management-run trust’s performance has benefited from the merger of the asset managers.

He says: ‘As a board, we believe that the merger between Aberdeen Asset Management and Standard Life has resulted in a strengthened investment team for the company and an improved investment process.

‘This would have helped performance but so would the tailwind of falling and volatile markets and a bursting of the tech bubble, which has brought the old Aberdeen quality style back into fashion. It is not possible to quantify these impacts but we can confidently say it has been an encouraging first year post-merger.’

The trust recently increased its weighting towards UK stocks recognising the more appealing valuations on offer.

Additions to the portfolio in the first half included paving stones specialist Marshalls (MSLH), housebuilder Countryside (CSP), auto dealer Inchcape (INCH), London Stock Exchange (LSE) and emerging markets asset manager Ashmore (ASHM).

The trust also has positions in Associated British Foods (ABF), Rentokil (RTO), National Grid (NG.), Telecom Plus (TEP) and RELX (REL), among others.

Among its divestments in the second half of 2018 were engineering firms Rolls-Royce (RR.) and Rotork (ROR) while it trimmed its exposure to, among others, British American Tobacco (BATS) and Vodafone (VOD).

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