The Troy Income & Growth Trust has posted a 6.2 per cent return over the past six months as its board warns the trend of dividend cuts “may have further to go”.
Figures from the investment trust’s interim results recorded a net asset value (NAV) total return of 6.2 per cent for the six month period and a share price total return of 6.7 per cent, both of which compare favourably to the FTSE All Share index gain of 3.5 per cent.
In spite of the strong performance David Warnock, chairman of the trust, highlighted the difficult environment for income investors in the period and in particular the number of recent dividend cuts announced by some of the largest companies in the UK market.
“This trend may yet have further to go. Payout ratios remain stretched in many sectors and those wishing to generate meaningful dividend income from the equity market will have to successfully differentiate between those yields that are sustainable and those that are optically enticing but fundamentally unsustainable,” he explained.
But he pointed out the concentration of income in the portfolio is “considerably lower” than that of the market as a whole and noted the trust’s investment process meant it “has had no exposure to 14 out of the 15 FTSE 100 companies that have either cut, or announced their intention to cut, their dividends over the last 18 months”.
That said, Mr Warnock acknowledged: “This does provide some comfort but the dividend prospects of all the companies in the portfolio will require constant monitoring if the real dividend growth trajectory is to be sustained.”
