Ian Cowie: this investment trust is riding the waves

Not many investment trusts yield 7.3% income and delivered total returns of 29% over the last year but remain priced 13% below their net asset value (NAV). 

But a specialist fund in which I am a happy shareholder has done so. 

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It’s an ill wind that blows no good when climate change and violent conflict collide with international trade.

Iranian attacks on shipping and American sanctions on Iran, likened by President Donald Trump to “economic D-Day”,  have closed the Strait of Hormuz, through which a fifth of the global oil and gas supply used to flow. 

On the other side of the world, lack of rain in the early stages of what is forecast to be the worst El Niño ever, have restricted container ships’ passage through the Panama Canal, raising costs for international exports of many goods.

However, higher freight rates are helpful for shipping businesses that deliver more than 80% of global trade. 

So, all the bad news hitting the headlines is good news for Tufton Assets Ord (LSE:SHIP)(stock market ticker: SHPP for sterling shares and SHIP for dollar-denominated stock), which specialises in leasing second-hand shipping.

These factors helped Tufton declare operating profits of $13.5 million (£10 million) for the second quarter (Q2) of this year or more than 43% above the $9.4 million profits declared for Q2 2025. 

Meanwhile, the fund’s total return on NAV surged 14.7% higher, after shrinking by 4.3% in the same three months last year.

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Nicolas Tirogalas, the portfolio manager, said: “This is our strongest quarterly NAV total return in almost five years, driven by rising charter rates and higher vessel values.

“The dry bulk market strengthened with demand for grain and long-haul iron ore and bauxite imports into Asia, whereas the tanker market was largely boosted by trade route reconfiguration following the closure of the Strait of Hormuz.”

Not only has Tufton managed to deliver the inflation-busting income and capital growth mentioned earlier, but it has succeeded in raising dividends by an annual average of 6.3% over the last five years, according to independent statisticians Morningstar.

Better still, Tirogalas claimed there might be more to come.

“Encouraged by the strong financial results and market outlook, the company has decided to raise its target annual dividend by 10%, from $0.10 per share to $0.11 per share, starting in the third quarter of this year,” he said.

“We therefore expect to recommend a Q3 2026 dividend of $0.0275 per share, payable on 25 November 2026. After this increase, the forecast dividend cover is 1.9 times over the next 18 months.”

Returning to how geopolitics can affect this business, he added: “Product tankers - which carry diesel, petrol, aviation fuel, and chemicals - saw rates spike to record highs in March following the start of the US-Iran war.

“Separately, the dry bulk market strengthened as demand for grain, iron ore and bauxite grew. 

“This strength is expected to continue into the second half of 2026 because of an intensifying El Niño and the disruption of liquefied natural gas (LNG) and liquefied petroleum gas (LPG) flows through the Strait of Hormuz, causing countries to diversify energy sources, leading to increased tonne-mile demand for shipping.”

Despite all that, Tufton’s total assets of £419 million remain valued on the stock market at only £362 million; a double-digit discount. So, don’t say I only tell you about winners when it’s too late to consider jumping aboard.

It’s only fair to add that the macroeconomic, climatic and geopolitical events mentioned above are delivering a following wind or uplift to many businesses engaged in seaborne trade. 

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My shares in A P Moller Maersk AS Class B (XETRA:DP4B), the Danish container logistics giant, have soared an eye-stretching 60% higher over the last year.

So, I am jolly glad I didn’t bail out of this shipping group when it cut its dividend last February. 

While that was disappointing, it wasn’t a huge surprise as this is a cyclical industry - where feasts lead to famines or vice versa - and Maersk had cut its dividend before, as recently as 2017. The Copenhagen-based business currently yields just under 2.2% dividend income.

Closer to home, I also have indirect exposure to the world’s biggest LPG shipping group, BW LPG Ltd (NYSE:BWLP), via the investment trust CQS Natural Resources G&I Ord (LSE:CYN), which I told you about recently.

It’s early days yet, but CQS shares I bought for £3.48 in July were trading at £4.33 ex-dividend this week, which means buyers today will not receive the next income payment of 6.94p per share, due tomorrow.

Not so long ago, many British investors had substantial stakes in seaborne trade but relatively few do so today. Maybe it’s time for a rethink. 

Ian Cowie is a freelance contributor and not a direct employee of interactive investor.

Ian Cowie is a shareholder in CQS Resources Growth and Income (CYN), Maersk (MAERSKB) and Tufton Assets (SHPP) as part of a globally diversified portfolio of investment trusts and other shares.