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Our faith in Merchants Trust is rewarded as it nearly doubles the market’s return
Merchants Trust (MRCH) 580p
Gain to date: 9.3%
Original entry point: Buy at 531p, 30 September 2021
When we flagged the attractions of investment trust Merchants (MRCH) in September 2021 we noted it had a track record of outperforming the market and its latest annual results saw it come up trumps again.
The numbers covering the 12 months to 31 January 2022 revealed a 35.7% net asset value total return, almost double the 18.9% generated by its benchmark index the FTSE All-Share over the same period.
The full-year dividend of 27.3p is set to include a 2.3p per share contribution from cash reserves, helping to maintain a now 40-year track record of dividend increases. It used 9.9p of reserves to help fund dividends in 2021.
It leaves cash reserves of 16p per share on the balance sheet for future use, but Merchants expressed confidence that the dividend for the current year will return to being fully covered, allowing cash reserves to be rebuilt.
The portfolio is packed with large UK businesses including GlaxoSmithKline (GSK), Shell (SHEL) and Vodafone (VOD). In commentary accompanying the results, chairman Colin Clark observed there are ‘opportunities abound when markets are volatile’.
SHARES SAYS: Merchants Trust is an attractive income investment, currently yielding 4.7%. Buy now.