High-yield approach continues to pay dividends

Merchants has raised its dividend every year for 37 years.

The Merchants Trust (MRCH) is managed by Allianz Global Investors. It invests mainly in large UK-quoted companies for an above-average level of income and income growth together with long term growth of capital. Its annual report for the year to 31 January 2019 shows assets of £533 million.

Simon Gergel has been manager since 2006. He has a long-term value focus and aims to build a portfolio of solid businesses with good prospects for growth, attractive dividends and valuable assets, priced at a level at which they can deliver good total returns for shareholders. He takes stewardship responsibilities seriously, voting at all AGMs and engaging regularly with investee companies’ executives and boards.

Merchants’ year-end portfolio comprised 44 holdings. Thirteen holdings were categorised as high yield, 18 as cyclical growth, seven as defensive growth, and six as special situations. Gearing is used to enhance the portfolio’s returns and averaged 19.8% over the year. Although debt refinancing had reduced its average cost from 8.5% to 6.1%, it detracted from total returns in a falling market.

NAV total returns were -5.2%, compared to the 3.8% fall on MRCH’s benchmark, the FTSE All-Share index. Share price total returns were 1.7%. The dividend, which is paid quarterly, was raised 4.8% to 26p. Ongoing charges were 0.58%.

Merchants has raised its dividend every year for 37 years, and offers one of the highest yields in the AIC UK equity income sector.

Website: www.merchants.co.uk

The Merchants trust

Merchants trust company reports graph Nov 2019

Note: Year to 31 January 2019. Figures derived from the company's annual report. * Debt at market value.

 

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