Discount Watch: 9
That’s the number of trusts whose discounts hit 52-week highs over the last seven days – an improvement on last week’s 14. Of the nine, three make an appearance for the second consecutive week: UK investor Diverse Income Trust (DIVI); Baillie Gifford European Growth (BGEU); and European big box investor Tritax EuroBox (EBOX). Sector-wise, property and private equity contributed the most names with three each. In property, in addition to EBOX, the discounts of abrdn European Logistics (ASLI) and Phoenix Spree Deutschland (PSDL) made new 12-month highs. In private equity, LMS Capital (LMS), Chrysalis Investments (CHRY) and Schroder British Opportunities (SBO) made it onto the list. Finally, infrastructure’s Sequoia Economic Infrastructure(SEQI) completed this week’s nine.
Dividend Watch: 2014
NextEnergy Solar (NESF) is set to maintain its record for increasing its target dividend every year since the Company listed in 2014 after the Board approved a targeted 5% increase in the pay out to 7.52p per share for the year ending 31 March 2023.
71%, that’s the amount Bankers (BNKR) has grown its dividends over the 10-year period to 31 October 2021, easily surpassing the 20% increase seen in the Consumer Price Index. The combination of an improving investment income outlook and the trust’s revenue reserve has led to an increase in forecast dividend growth for the current financial year from at least 3% to at least 5%.
32%, the increase in Schroder UK Mid Cap’s (SCP) interim dividend. According to SCP’s Half-year Report, the 5.0p per share pay out “is comfortably covered by earnings per share for the period and reflects our confidence in the quality and resilience of the underlying equity portfolio.”
7%, the proposed increase in SDCL Energy Efficiency Income’s (SEIT) target dividend to 6p per share for the year ending 31 March 2023.
Finally, total dividends from Chelverton UK Dividend Trust (SDV) in 2022 will come in at 11p per share, a year-on-year increase of 7.1% (2021: 10.272p).
Borrowings Watch: 42%
Total gearing at NextEnergy Solar (NESF), which comprises financial debt and preference shares, came in at 42% as at 31 March 2022 (2021: 43%). This falls within the 50% limit contained within the investment policy.
Schroder UK Mid Cap’s (SCP) net gearing as at 31 March 2022 stood at 8.8% compared to 7.7% at the 30 September 2021 year end. The increase is down to the fund manager seeing “further opportunities in the market to deploy the Company’s £25 million revolving credit facility. During the period, the Board approved an additional £10 million three-year revolving loan facility with Scotiabank in addition to the existing £25 million three-year term loan. This should provide the Manager with greater flexibility to exploit attractive investment opportunities as they arise.”
Fee Watch: 0.48%
That’s Bankers’ (BNKR) ongoing charges ratio. Blackrock Sustainable American Income’s (BRSA) management fees, meanwhile, have been lowered from 0.75% to 0.70% of the Company’s net assets following the trust’s investment mandate change.
Raise Watch: £459 million
Digital 9 Infrastructure (DGI9) launched a placing and offer for subscription of new ordinary shares to help fund the £459.3 million acquisition of a majority economic stake in UK-based Arqiva Group, a data, network and communications service provider. The net proceeds will also be used to “invest further capital into the Group’s existing subsea fibre, Nordic data centre and edge data centre platforms to fund the expansion of capacity and to finance future acquisitions from a near-term pipeline of approximately £510 million.” The Offer for Subscription will close at 11.00 a.m. on 6 July 2022 while the Placing is expected to close at 12.00 p.m. on 7 July 2022.
Scottish Mortgage Watch: three out of three?
Could Scottish Mortgage (SMT) make it three weeks in a row of relative outperformance? At the beginning of the week, the global IT sector was off 3.3% compared to its level on 2 June 2022. By contrast, SMT’s NAV was flat while the share price was off 5.9%. By the end of the week, the global sector had widened the deficit from 2 June to -5.3%, while SMT’s NAV performance had also deteriorated to -4.5%. So too did SMT’s share price which was nursing an 8.3% fall from its 2 June 2022 level. No third week of relative outperformance for the UK’s largest investment trust then, but…
SMT did get a mention in despatches in This is Money article “How to invest in the electric car revolution: Ways to profit from the tailwind for a greener motoring future, from automotive stocks to chip firms” which featured in the Daily Mail on 1 July 2022.
As the article explains: “If you’re looking for exposure to electric vehicles theme via a fund it may be worth looking at the Scottish Mortgage Investment Trust, which invests in many of the technology stocks that have led the market lower and is 49 per cent down in just six months. It trades at a discount to the value of its assets of around 14 per cent. The average over the past three years is less than 1 per cent.”
As at 31 May 2022, 5.4% of SMT’s portfolio was invested in EV manufacturer Telsa and a further 2.5% each in battery company Northvolt and chipmaker NVIDIA, “a big provider of chips to the autos industry, including in China.”
Media Watch: mid-caps
Medium-sized companies came under the spotlight of the Times’ David Brenchley this week in his article “For a bargain investment, look to the FTSE 250” which appeared in the Sunday Times on 3 July 2022. The article highlights how the UK mid-cap index has underperformed its larger sibling the FTSE 100 by a considerable margin this year: “The FTSE 100 of large UK firms has fallen 4.7 per cent, which isn’t thrilling but is a lot better than its US counterpart, the S&P 500, which is down 20 per cent. One section of the UK stock market that hasn’t held up as well is the part that contains medium-sized companies. The FTSE 250 has been teetering on bear market territory, having fallen about 22 per cent this year.”
Brenchley sees the relative underperformance of the FTSE 250 as “an interesting opportunity. Investing in the FTSE 250 would have netted you bigger gains than the S&P 500 over the past 25 years — and much more than an investment in the FTSE 100.” And according to the article, this is no fluke: “the FTSE 250’s longer-term outperformance makes sense. Smaller companies find it easier to grow their businesses than large firms. They’re also more nimble and able to change their strategy more quickly.”
The article puts forward a number of trusts that invest in this area of the market as a possible way of gaining exposure to the index – Odyssean (OIT), Mercantile (MRC) and Blackrock Throgmorton (THRG). Unsurprisingly, the share prices of all three trusts are nursing falls too. They “are down 4.5 per cent, 36 per cent, 45 per cent in 2022 respectively.” abrdn UK Smaller Companies Growth (AUSC), meanwhile, is singled out by Winterflood’s Emma Bird who is quoted as saying: “We rate the management team highly and believe it has a consistent approach”.