The £222m Standard Life Equity Income Trust has increased its total dividend payout by 5 per cent to 14.70p for the year to September 30 2015.
In its annual financial report the investment trust, which is managed by Thomas Moore, reported a net asset value total return of 14.1 per cent and a share price total return of 15.2 per cent in the year, compared with the FTSE All Share index loss of 2.3 per cent in the same period.
Richard Burns, chairman of the trust’s board noted: “Our strategy since Thomas took over has been to steadily increase our exposure to mid-sized and smaller companies and stocks on Standard Life’s “winners list”.
“As a result, we now have far less invested in the largest companies in the market and correspondingly much more in medium and small companies than the index. This change has been very successful and, although it may not be successful every year, we expect it will continue to deliver good results over the long term.”
Mr Moore, meanwhile, reported that “heavy exposure to domestic sectors that benefited from the strength of the UK economic recovery” helped boost performance during the year.
He highlighted stocks such as Rightmove and Cineworld, while the portfolio’s limited exposure to mining and oil & gas sectors also proved successful.
That said, the manager revealed he started to increase the trust’s weighting in the mining sector “as valuations became compelling”.
He explained: “In September the company bought a new holding in BHP Billiton whose diversified portfolio of high-quality assets, low production costs and strong balance sheet should underpin cashflows and dividends even at depressed commodity prices.”
In addition Mr Moore highlighted that following a period of marked underperformance the FTSE 100 index is now beginning to offer a broader selection of compelling value situations.
“We remain responsive to opportunities resulting from periods of market dislocation such as the recent fall-out in emerging markets. Having had limited exposure to overseas earnings, the company has recently begun to rebuild exposure to certain FTSE 100 stocks that offer market-leading positions and solid balance sheets, underpinning their dividends,” he stated.
