Invesco Perpetual’s top-performing UK Smaller Companies investment trust is set to target a beefed-up dividend in light of the “imminent reform to pension rules”.
The trust’s board announced today it had been in discussions with major shareholders who own more than 50 per cent of the trust’s shares about immediate changes to its dividend policy.
“The board, mindful of the current interest rate environment and the imminent reform to pension rules, believes that investors will continue to be attracted to income-producing investments for the foreseeable future,” the board said.
It added the performance goal of the company would “no longer include wording to the effect that the ‘pursuit of income is of secondary importance’” and that this would “attract those investors seeking higher yields as well as growth in capital over the longer term”.
Following the talks with shareholders, the trust will now pay a dividend of 12.15p per share for the year ended January 31, making a total dividend for the year of 13.75p per share - an increase of 111.5 per cent compared to the previous year.
This, the board said, would be equivalent to a yield of 4 per cent on the share price of 344p.
“This final dividend will be substantially funded out of available income and brought forward revenue reserves,” the board said.
The trust will spend £600,000 from its reserves to help pay for the dividend.
“Dividends will be funded by distributing 100 per cent of available income each year and utilising the company’s powers to distribute a limited amount of capital as income,” the board said.
“On the basis of the proposed portfolio yield this is anticipated to amount to circa 2 per cent of assets for the year to January 31 2016. Dividends will be paid quarterly.
The £204m trust has been run by Jonathan Brown and Richard Smith since June 2002, in which time it has delivered a return of 346 per cent compared to the 295.7 per cent rise in the Numis Smaller Companies ex Investment Companies index, according to data from FE Analytics.
In spite of the strong performance, the trust’s shares trade at a discount of 9.2 per cent to the net value of its assets.
The board said it had made efforts since 2012 to bring the discount in but hoped these new measures would help it further.