Alliance Trust on track for 54th year of consecutive dividend increases

Alliance Trust is on track to deliver a dividend increase of 3% for 2020, which would mark the 54th consecutive year of dividend increases. 

Alliance Trust is on track to deliver a dividend increase of 3% for 2020, but with the caveat that this may change if another severe stock market sell-off occurs in the second half of the year.

In its results for the six months ended 30 June 2020, Alliance Trust notes that “unless market volatility is greater than anticipated in the second half of the year, the company expects to use its strong revenue reserves to maintain (its interim dividend of 3.595p, an increase of 3% year-on-year) that level of increase for the remaining interim dividends for 2020, resulting in the 54th year of dividend increases.”

Gregor Stewart, chairman of Alliance Trust, adds: “Our own distributable reserves remain strong.” He continues: “Our revenue reserve currently stands at £109.1 million, more than twice last year’s dividend payment of £45.7 million, and our distributable reserves could be boosted further if we gain approval from shareholders at next year’s AGM to convert our £645.3 million merger reserve into distributable reserves.”

The dividend pledge comes hot on the heels of an announcement from City of London investment trust, which earlier this week confirmed it will continue its 54-year streak of increasing dividend payments in 2020. 

Alliance Trust reported a net asset value decline of -3.5% and share price total return decline of -5.8% over the six-month period. In contrast, its benchmark MSCI All Country World index delivered a small gain of 0.5%.

Overall, analysts are positive about Alliance Trust’s move to a multi-manager structure in the three years plus since Willis Towers Watson took over management of the portfolio, despite performance lagging the benchmark. 

Since 1 April 2017 Alliance Trust has delivered a share price total return of 21.5% versus 26.2% for the MSCI All Country World index. Alliance Trust has a target to outperform the MSCI All Country World index by 2% a year, net of costs, over rolling three-year periods.

It has, however, been a tough period for active fund managers, particularly when as in case of Alliance Trust performance is pitted against an index that has seen its performance driven by a relatively small number of technology giants listed in the US market.