The Merchants Trust Plc

UK Equity Income

New for 2020. Delivers rising dividends from large companies    

Many investment trusts have interesting histories, and Merchants is no exception. Incorporated in 1889, it initially invested in the fixed interest securities of railway companies in the US, Canada and South America. Today, it concentrates on major UK companies with above-average dividend yields. Run by Simon Gergel, chief investment officer at Allianz Global Investors, since 2006, it aims to deliver a high and rising income together with capital growth; it has paid rising dividends year on year for 37 years. The trust yields 4.7% and income is distributed quarterly.

Gergel invests in a diversified portfolio of around 50 predominantly large, well-established and well-known UK companies. He has comfortably and consistently outperformed the FTSE All-Share index. His largest weighting is to financials at 28%. Ahead of the UK election in December 2019, he increased exposure to domestic banks via Royal Bank of Scotland and Barclays, albeit his exposure is significantly below the benchmark's as it remains a highly cyclical industry. Elsewhere, he continues to find many strong companies to invest in trading on surprisingly modest valuations. In aggregate, he believes these shares should be able to deliver a combination of a high dividend yield and capital growth in line with Merchants' long-term objectives.

The trust's income and growth prospects are supercharged, thanks to its use of net gearing at more than 19% - something that will work in its favour in a rising market but go against it when markets fall. Refinancing has seen the weighted cost of its debt fall from 8.5% in January 2018 to 3.5% today. That has helped narrow the discount at which its shares trade from 7% to a modest premium.

Narrative and ratings content all as of January 2020.

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The Merchants Trust Plc
Allianz Global Investors (UK) Ltd
Closed Ended Investment Company
UK Equity Income
0.59 %
Risk Rating
3 Year Sharpe
3 Year Alpha
6.8 %
Fund Size
£ 432.18 million
Discount Premium
To provide an above average level of income and income growth together with long-term capital growth through a policy of investing mainly in higher yielding UK companies. The Company aims to achieve the objective through a strategy of investing in a portfolio of mainly higher yielding large UK companies and by using appropriate gearing to enhance returns. This strategy is designed for those investors who require a single investment in a diversified and professionally managed portfolio.
Holding %
GlaxoSmithKline PLC 7.21 %
British American Tobacco PLC 6.71 %
Imperial Brands PLC 5.52 %
BHP Group PLC 4.46 %
Royal Dutch Shell PLC B 4.07 %
Barclays PLC 4.05 %
IG Group Holdings PLC 3.90 %
Tate & Lyle PLC 3.90 %
BAE Systems PLC 3.80 %
St James's Place PLC 3.67 %
Region %
United Kingdom 96.65 %
Sector %
Financial Services 18.35 %
Consumer Defensive 17.68 %
Industrials 15.86 %
Consumer Cyclical 8.38 %
Communication Services 8.08 %
Basic materials 7.74 %
Utilities 7.49 %
Energy 6.89 %
Healthcare 6.09 %
Allianz Global Investors (UK) Ltd
EC2M 3TY, London, United Kingdom
Legal Structure
Closed Ended Investment Company


Simon Gergel
Joined 06/01/2006

Simon Gergel joined Allianz Global Investors in April 2006 from HSBC Halbis Partners where he managed over £900m in high income funds as well as core institutional and life UK equity portfolios. Prior to joining HSBC in 2001, Simon worked for 14 years at Phillips& Drew Fund Management / UBS Asset Management where he was involved in all aspects of UK equity fund management, including research, portfolio management and account director roles. He graduated in 1987 from Cambridge University with an honours degree in mathematics and is an associate of the UK Society of Investment Professionals.

Data provided by Morningstar.

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