Investments  

Property allows Scottish American to increase dividend

Property allows Scottish American to increase dividend

Strong performance from its investments in bonds and property allowed the £570m Scottish American investment trust to increase its dividend by 2.5 per cent for 2017.

In performance terms, the trust returned 17.1 per cent, just shy of the 17.6 per cent returned by the average trust in the AIC Global Equity Income sector in the same time period.

Peter Moon, the trust’s chairman, said the bond and equity investments had contributed positively to performance, but he said the investments in property had made a "significant" contribution to returns and the growth of the dividend.

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He said: "The principal protection against the broader market concerns lies in the manager’s stock-driven approach which emphasises the importance of both income dependability and real growth.

"Dependability and quality of income should prove their worth if rising interest rates or an economic wild card cause problems for more indebted companies with less resilient cashflows.

"Growing cashflows on the other hand facilitate growing distributions, both from the companies which we own and to you in turn as shareholders."

The trust, which is managed by Baillie Gifford, has increased its dividend for 38 consecutive years. The dividend is 11.1p per share, and is fully covered by the 11.3p per share earned by the trust in year to 31 December.

Global equities made up 93 per cent of the trust's average allocation while direct property accounted for 16 per cent.

The trust, which has a premium of 2.89 per cent, has its largest holding in Coca Cola, at 2.1 per cent of total assets, followed by Johnson and Johnson, also at 2.1 per cent.

Mr Moon said: "Whether inflation persists at its current level is less clear, due to a combination of some weakness in the domestic economy and action by the Bank of England on the one hand and a strengthening oil price on the other.

"The likelihood of continued economic growth around the world seems strong, although the outlook for the UK economy is less positive. In addition the concerns relating to valuations and rising interest rates make share price progress less than certain, as has been demonstrated recently."

The managers of the trust changed in August 2017, with James Dow and Toby Ross taking the helm from Dominic Neary.

david.thorpe@ft.com