Interactive Investor

Alliance Trust boosts dividend by 26%, and avoids worst of tech rout

9th March 2023 10:43

Sam Benstead from interactive investor

A diversified investment portfolio helped the trust beat its benchmark in 2022. 

Global investment trust Alliance Trust upped its dividend for 2022 by 26%, to 24 pence, logging its 56-year consecutive year of increasing dividends. It paid 6 pence per share in each quarter of 2022.

This keeps it tied at the top of the Association of Investment Companies’ (AIC) “dividend hero” list, alongside City of London and Bankers. The current yield is around 2.4%.

Performance was strong in 2022, according to its annual report, released this week. The net asset value (NAV) of the trust – which outsources stock picking to nine specialist fund managers to build a portfolio of nearly 200 stocks – fell 7.1% last year compared with a 8.1% drop for its benchmark, the MSCI All Country World index. Its share price fell 5.8% compared with a 23.2% drop for the average global investment trust in 2022.

Performance benefited from the portfolio’s balanced style exposures, avoiding the worst of growth stock declines last year.

Alliance Trust manager, fund group Willis Towers Watson, said: “Whereas in previous years, our diversified stance had held back performance versus the market and many growth-style peers, due to the concentration of returns in a handful of expensive US growth stocks, in 2022 it enabled us to avoid the worst of the tech rout and, at the same time, benefit from the recovery in energy stocks.”

Not owning Tesla and Apple boosted relative returns versus the index, although it held some other fallen growth stars such as Amazon (NASDAQ:AMZN), Salesforce Inc (NYSE:CRM) and Alphabet (NASDAQ:GOOGL).

Owning oil firms helped the trust beat its benchmark last year as commodity prices rose. Exxon Mobil, BP and Petrobras were its biggest contributors to relative returns compared with the index.

Willis Towers Watson adds: “Our stock pickers also found winners in defence, where BAE Systems and Booz Allen Hamilton benefited from rising demand due to increased government spending. Our positions in healthcare and financials, with US-based UnitedHealth Group and Indian bank HDFC (NYSE:HDB) also boosted returns.”

Turnover last year was 56.7%, as its fund managers reacted to volatile markets and Alliance Trust redistributed a mandate given to UK stock picker R&M, worth 6% of the portfolio, into its other selected fund managers.

Examples of outright sales in 2022 included Novo Nordisk, which was replaced with ICON. ICON is a leading contract research organisation specialising in the strategic development, management and analysis of programmes that support clinical development.

It also sold Nutrien (NYSE:NTR), the world’s largest crop nutrient company, whose share price increased sharply as fertiliser prices rose to all-time highs, and purchased Stericycle (NASDAQ:SRCL), a leading global provider of regulated waste disposal services to businesses. 

Between 1 April 2017, when Alliance Trust adopted its multi-manager strategy, and 31 December 2022, the company’s share price total was 54.7% against the average share price return of the AIC Global Sector peer group of 41.2%.  

It has, however, failed to outperform its benchmark by the target that was set when Willis Towers Watson took over the management. Its target is to outperform the MSCI All Country World Index, net of costs, by 2% a year over three-year rolling periods.

The trust estimates that anyone investing £100 in April 2017 will have seen the value of their investment grow to £155 if they had reinvested their dividends.

The board said it aims to continue delivering a rising dividend year after year as well as capital growth.

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