Interactive Investor

F&C IT delivers 51st year of rising dividends with inflation-beating payout

10th March 2022 11:51

Kyle Caldwell from interactive investor

The UK’s oldest investment trust, which was founded in 1868, has upped dividends by 5.8%.

F&C Investment Trust (LSE:FCIT) has continued its stellar dividend track record with an inflation-beating dividend increase.

The UK’s oldest investment trust, which was founded in 1868, upped dividends by 5.8% in its latest financial year, which runs to the end of 2021. This is ahead of an inflation rate of 5.4% in December, as measured by the Consumer Prices Index.

The total dividend for the year is 12.8p per share, up from 12.1p per share a year ago; representing the 51st dividend increase in a row.

The performance of its underlying investments – the net asset value (NAV) – outperformed the benchmark. F&C Investment Trust’s NAV was up 21.7%, versus 19.5% for the FTSE All-World Index.

Its share price total return, however, fell slightly short, up 19.4%. This was due to the trust’s discount widening over the year, from 5.4% to 7.3%.

Private equity, which comprises 10% of the trust’s assets, was a key contributor to performance. Gearing was also cited as providing a performance boost.

Some of the listed portfolios, however, slightly lagged the return from the benchmark.

The trust, which appears on interactive investor's Super 60 rated list of investments, adopts a multi-manager strategy and fund manager Paul Niven is responsible for the asset allocation and level of gearing. Niven divides the portfolio into a range of global and regional strategies. Some of these are subcontracted to external managers.

The global trust has a very small weighting to two Russian securities, which comprised 0.3% of assets at the end of 2021. Following Russia’s invasion of Ukraine, they have been written down. F&C adds that once liquidity permits, it will seek to divest all direct exposure to Russian equities.

Niven said: The Russian invasion of Ukraine is an historically significant event which is exerting a terrible toll on the Ukrainian people. Events are fast-moving and causing significant volatility in markets and creating challenges to the fundamental outlook for the global economy.

The immediate impact of Ukraine, beyond the unfolding humanitarian crisis, is to dent an economic recovery that was under way as the impact of the Omicron variant of Covid 19 receded. It will also raise inflation in the near term via the direct impact on food and energy prices, and by exacerbating supply shortages.

“Expectations for global growth have also been cut, with Europe particularly exposed and there is now some greater uncertainty with respect to the near-term outlook for central bank policy.”

In its latest results, the trust reaffirmed the commitment it made a year ago to transition its portfolio to net-zero carbon emissions by 2050, at the latest.  

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