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Bankers notches up 49 years of divi hikes after 'special' year

Global investment trust keeps pace with 'dividend heroes' thanks in part to special payouts from UK companies.

 
Bankers notches up 49 years of divi hikes after 'special' year

The Bankers (BNKR ) investment trust has hiked its dividend for the 49th consecutive year, thanks in part to a slew of special payouts from UK companies.

The global investment trust has maintained its place towards the head of the roster of 'dividend heroes', the moniker given to trusts which have managed consecutive dividend increases stretching back over the decades.

That places it level with City of London (CTY ) investment trust, which is chasing a 50-year unbroken record of dividend increases this year.

Alliance Trust (ATST ) and Caledonia (CLDN ) meanwhile boast 48-year track records of dividend rises, and are due to report their full-year results later this year.

Bankers recommended a final dividend payment of 4p per share, taking total 2015 payments to 15.8p, a 6.8% increase on 2014's figure.

Fund manager Alex Crooke said that special payouts from UK companies held in the portfolio had helped with the dividend hike, which is higher than the 4% rise predicted at the beginning of the year.

'The UK remains a key market for income generation and produced a large number of special dividends which boosted our overall income by £2 million,' he said.

'This has been an exceptional year for specials and is a function of low growth in that companies have limited need to invest new capital. We expect further special dividends in the coming year but not to the same extent.'

The trust delivered a 5.7% rise in net asset value (NAV) over the year to the end of October, with the shares rising 14.9% over that period as their discount to NAV narrowed.

That was despite a slump in the shares of two of its major holdings, BP (BP) and Shell (RDSb), against the backdrop of a tumbling oil price.

US overhaul

The trust was helped by a successful overhaul of its US portfolio, which has been shifted towards a growth approach, with Ian Warmerdam taking over as manager from Anthony Gifford in its 2014 financial year. The portfolio delivered 12.7% over the year, versus 7.2% from the index.

'The US portfolio is undoubtedly now more growth oriented but we believe that the US economy is entering a period of steady recovery and a growth bias should reward us better in terms of returns,' said Crooke.

'We have some exciting investments which are positioned in areas that we expect to exhibit strong growth and should be less exposed to increasing US interest rates,' he added.

Chinese stocks now make up a greater proportion of the trust after the fund was granted permission to invest in the 'A' shares traded on the country's domestic stock market in its 2014 financial year.

Despite the rollercoaster year for China shares, the portfolio ended last October 51.7% up over the year. 'The Chinese portfolio had a very volatile year but still exceeded all our expectations,' said Crooke.

'We started this investment to gain greater exposure to the growth in Chinese consumer spending and because we felt share prices were extremely cheap by historic standards.' 

Crooke employs a number of Henderson's regional specialist fund managers to run the non-UK elements of the trust's portfolio. Charlie Awdry runs the China stocks, Tim Stevenson manages the European portfolio, Michael Kerley is in charge of Pacific ex-Japan shares, Michael Wood-Martin looks after the Japan exposure, and the trust also houses an emerging markets portfolio.

Only the latter failed to beat its benchmark over the 12 months to 31 October, hurt by too much exposure to Latin America and hit by the fall in local currencies.

The trust also refinanced during the period, issuing £50 million of 20-year loan notes with a 3.68% coupon in April ahead of a £10 million long-term 10.5% debenture due to be repaid in October.

Waiting for opportunities

Crooke said at the trust still retained the bulk of the new funds 'while awaiting suitable buying opportunities'.

'We are keeping a cautious eye on markets to judge the right time to invest the cash balances from the loan notes issue and also to protect our investment income,' he said.

Crooke also sounded a warning note on the prospect for dividends in the oil sector, with the price of Brent crude languishing near 12-year lows at just above $30.

'Pressure on dividends is undoubtedly rising in the commodity sectors and, while major oil companies will keep their dividends for a time, we will see some stress this year if the price of oil stays below $50 a barrel,' he said.

1 comment so far. Why not have your say?

Ladysaver

Jan 19, 2016 at 19:10

I like Bankers and see it as a steady long-term hold. Thank you for this little bit of insight.

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