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Gearing boosts dividend at underperforming Schroders trust

Gearing boosts dividend at underperforming Schroders trust

The use of gearing has boosted the dividend of the Schroders Income Growth trust in what was a tough year for the fund.

The trust lost 4.2 per cent in the six months to the end of February 2019, compared with a loss of 3.7 per cent for the FTSE All Share Index.

However, the income of the trust rose by 26 per cent, with the timing of dividend payments, a lower management fee and 13.8 per cent gearing all contributing to the higher dividend. Gearing means borrowing to make more investments.

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The trust paid a dividend of 2.4p.

In the half year results statement out this morning (May 30), the board acknowledged that while gearing had helped boost the income, it contributed negatively to the overall return of the trust.

Ian Barby, chairman of the trust, said: "Our primary goal is growth of income, together with the opportunity for capital growth.

"We are aware of the uncertainty facing companies in the portfolio as they try and anticipate the future trading environment, but so far we take comfort from the dividend increases they are providing. Importantly we also note the manager's optimism about opportunities for the portfolio."

He added: "The Brexit negotiations and the uncertainty surrounding global growth remain challenges.

"We are confident that the portfolio's income will continue to grow in real terms, a key objective of your company, and that this will result, over time, in an increase in the company's NAV. The shares are currently yielding 4.2 per cent per annum."

david.thorpe@ft.com