Attractive and progressive dividends should bolster performance of rehabilitated fund
Thursday 09 Jun 2022 Author: Steven Frazer

A lot of water has passed under the bridge since one-time star fund manager Mark Barnett was replaced at the helm of Edinburgh Investment Trust (EDIN) – a global pandemic, a stock market collapse and widespread overhaul of the portfolio.

Now almost three years on, the results speak for themselves and Shares believes investors can expect more of the same in the years ahead. Since Majedie Asset Management’s James de Uphaugh took the reins in March 2020, the net asset value total return is 47.8% versus its benchmark FTSE All Share’s 39.5%.

Moving quickly to rebalance the portfolio during lockdown has stood the trust in good stead, adding the likes Ashtead (AHT) and Dunelm, decent-sized long-run growth stories to bolster cyclical stalwarts such as Anglo American (AAL), BAE Systems (BA.), Morrisons (now private) and Tesco (TSCO), all good contributors in 2021.

Final results to 31 March 2022 showed NAV and shareholder total returns (share price plus dividends) of 14.1% and 10.6%. The FTSE All Share had a total return of 13%, reflecting a widening in the discount throughout the year, to a current 7%, according to Morningstar data.

That’s narrowed from year end’s 7.7% but is way up on last year’s 4.5%, prompting the trust to swing into share buyback mode since the start of 2022, a sensible way to support returns.

AN ‘ALL-WEATHER’ PORTFOLIO

Despite the changes of recent years, Edinburgh Investment Trust remains true to its original UK-focused knitting, investing in a mixture of value, growth and recovery stocks. Aside from the names already mentioned, Shell (SHEL), AstraZeneca (AZN) and NatWest (NWG) are sizeable stakes in the portfolio.

Investec analyst Alan Brierley says: ‘The manager has constructed a diversified portfolio with all-weather potential, and a balance of growth, value and recovery stocks, and they believe that these quality companies will have pricing power in the current regime.’

The portfolio also provides investors with a stable base of well-funded large-caps that throw off oodles of cash, feeding dividends that yield almost 4% according to Morningstar data. Last year’s dividend was 24.8p per share, having previously been rebased with the aim of delivering superior long-term dividend growth in future.

The trust also boasts a relatively modest 0.52% ongoing charge (for an actively-managed fund).

As Investec’s Brierley notes ‘Uphaugh and his team see UK equities in the foothills of a multi-year rehabilitation, with low valuations a function of factors that are firmly in the past’.

We believe the new-look Edinbugh Investment Trust is a good all-rounder for investors keen to benefit from improving sentiment to UK stocks.


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