The board says a progressive dividend policy will continue to be sustainable at a higher dividend level.
Alliance Trust (LSE:ATST) has hiked its dividend by 32.5% as its moves to return a higher amount of income to shareholders in future.
The trust, which through a multi-manager structure invests globally, announced this morning that it expects to pay a total dividend of 19.054p in 2021, up from 14.38p for the year to 31 December 2020.
From the new and higher ‘dividend reset level’ the board says a progressive dividend policy will continue to be sustainable. The trust is a ‘dividend hero’, having increased its income payments for 54 consecutive years. Eleven trusts have raised dividends for at least four decades.
Alliance Trust pointed out that a higher dividend in future is supported by significant distributable reserves, which stood at more than £3.3 billion at the end of June.
- 19 investment trusts that have raised dividends for at least two decades
- Funds versus trusts: the key differences explained
- Funds and trusts for a hands-off approach
Gregor Stewart, chair of Alliance Trust, said: “Shareholder feedback has indicated that there is support for a higher dividend, as long as it is sustainable and affordable. The expected recovery in the income from the portfolio and flexibility afforded by our extensive and recently enhanced distributable reserves means that an increased level is affordable and that our track record of annual dividend increases can be sustained. We have therefore decided to reset the dividend to a more attractive level.
“Combined with strong investment performance, we believe resetting our dividend will reinforce Alliance Trust’s position as an attractive core global equity investment, providing shareholders with a real return through a combination of capital growth and a rising dividend.”
Speaking to interactive investor earlier this year, Craig Baker of Willis Towers Watson, head of Alliance Trust’s investment committee, said that “no one is worried about the trust’s progressive dividend policy” due to the trust’s “significant reserves”.
Since April 2017, Alliance Trust has adopted a multi-manager approach, overseen by Willis Towers Watson. Since its appointment in 2017 (to the end of September), the company’s net asset value total return and total shareholder return were 60.1% and 60.4% respectively, against 59.3% for the benchmark – the MSCI All Country World Index.
Alliance Trust’s investment objective and strategy remains the same. The trust aims to deliver a real return over the long term through a combination of capital growth and a rising dividend. It is currently (as at the end of trading on 29 October) on a discount of 7.2%. Its 12-month average discount figure is 7.2%.
These articles are provided for information purposes only. Occasionally, an opinion about whether to buy or sell a specific investment may be provided by third parties. The content is not intended to be a personal recommendation to buy or sell any financial instrument or product, or to adopt any investment strategy as it is not provided based on an assessment of your investing knowledge and experience, your financial situation or your investment objectives. The value of your investments, and the income derived from them, may go down as well as up. You may not get back all the money that you invest. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.
Full performance can be found on the company or index summary page on the interactive investor website. Simply click on the company's or index name highlighted in the article.