Highlights
- Annual dividend increased by 2.7%, the 51st year of consecutive growth. Investment management fee reduced to a competitive 0.35% for the first £1.1bn of the Company's net assets from 1 July 2024.
- Net Asset Value ("NAV") [A,B] total return of 9.9% for the Year.
- Share price [A,B] total return was 7.6% as the discount, calculated on a fair value NAV, widened from 8.2% to 10.5%.
- Over 7.0 million shares (6.3% of the total) bought back by the Company during the year ended 30 June 2024.
[A] considered to be an Alternative Performance Measure.
[B] With debt at fair value.
Investment Performance
Over the Year, the Company's NAV per share (with debt at fair value) rose 9.9% in total return terms, as compared to the Benchmark total return of 13.0%. The share price total return was 7.6% reflecting the discount widening from 8.2% to 10.5% (based on NAV with debt at fair value). Performance returns over the longer term are shown in the table below.
| 3 years ended 30 June 2024 (annualised) | 5 years ended 30 June 2024 (annualised) | 10 years ended 30 June 2024 (annualised) | |
| Performance (total return) | % | % | % |
| Share priceA,B | 3.9 | 4.6 | 5.5 |
| Net asset value per ordinary share A,B,C | 4.9 | 5.7 | 6.0 |
| FTSE All-Share | 7.4 | 5.5 | 5.9 |
Source: abrdn & Morningstar
A Total return.
B Considered to be an Alternative Performance Measure.
C With debt at fair value.
Dividend
The Board announced, on 30 July 2024, its 51st consecutive year of growing dividends. For the year ended 30 June 2024, the dividend increased from 37.5p to 38.5p per share, a rise of 2.7%. Revenue per share for the year was 37.4p, a slight decrease on last year's 38.7p. The Board understands that, whilst the short-term outlook for dividends is complicated by the increasing use of share buybacks by certain listed companies, one of the positive features of investment companies is their ability to smooth distributions to shareholders. The Board is confident in keeping its dividend growing in future years as it possesses revenue reserves, as at 30 June 2024, equivalent to 55% of the current annual dividend.
The Association of Investment Companies awards Dividend Hero status to investment trusts which have raised their annual dividend consecutively for twenty years or more. Maintaining that Dividend Hero status is a source of pride for the Board as it pursues its long-term objective of a high and growing dividend income combined with capital growth from a diversified portfolio consisting primarily of UK equities.
Discount and Share Buybacks
There has been turbulence in investment companies over the last 18 months or so, with discounts to NAV coming under pressure, particularly for those vehicles comprising less liquid assets. The UK equity income sector, despite the greater liquidity of its underlying stocks, was not immune from the overall trend as indicated by the widening of the Company's discount.
One reason for the higher level of discounts in the UK equity sector has been a widespread lack of enthusiasm for UK equities over the past few years. UK funds, in general, have not seen any net monthly inflows since July 2021. Many reasons have been put forward for this, including the uncertainty caused by Brexit, then the Covid epidemic, not to mention the recent political uncertainty, with four UK Prime Ministers in the past five years. UK Defined Benefit pension schemes have also sharply reduced their exposure to UK equities over the past two decades.
Share buybacks across the investment trust sector are currently running at record levels. During the course of the Year, the Board has pursued a policy of buybacks in order to limit the volatility of the discount.
Board Composition
Alan Giles, currently Senior Independent Director, has indicated that he will not seek re-election as a Director at the forthcoming Annual General Meeting and will retire from the Board at the conclusion of the meeting.
I am pleased to announce that Stephanie Eastment has agreed to become the Company's Senior Independent Director, replacing Alan, while Nandita Sahgal Tully will take over from Stephanie as Chair of the Audit Committee.
Overview
In addition to the significant widening of discounts across the investment trust sector, we have also witnessed unprecedented corporate actions and mergers over the past year with eight transactions completed and two more announced in 2024 to date. If discounts remain high, that trend is likely to continue. In some cases, the activity is due to potential corporate buyers seeing the value in the underlying assets. In some cases, this is due to investment trust boards, themselves, reviewing their own policies, the overall trends in their sectors and the scope for greater liquidity and economies of scale through judicious merger.
On a longer-term basis, however, despite all the turbulence, UK equities have returned 9.6% p.a. over the past 50 years. Crucially, about 40% of this return has derived from dividend income – highlighting the genuine attractions of long-term income investing. This is especially important for shareholders in this Company. There remains significant demand for a reliable income stream from many investment trust shareholders, and Murray Income Trust is well placed to fulfil this with its current yield of 4.5% and its record of consistent dividend growth over more than half a century.
It is also the case that UK equities are cheap by international standards. Whilst few commentators would argue that there is good value in the UK equity market and in those investment trusts trading at higher than average discounts, there is still the question of what might be the catalyst to unlock that value.
Read the full Annual Financial report here.
Important information
Risk factors you should consider prior to investing:
- The value of investments, and the income from them, can go down as well as up and investors may get back less than the amount invested.
- Past performance is not a guide to future results.
- Investment in the Company may not be appropriate for investors who plan to withdraw their money within 5 years.
- The Company may borrow to finance further investment (gearing). The use of gearing is likely to lead to volatility in the Net Asset Value (NAV) meaning that any movement in the value of the company’s assets will result in a magnified movement in the NAV.
- The Company may accumulate investment positions which represent more than normal trading volumes which may make it difficult to realise investments and may lead to volatility in the market price of the Company’s shares.
- The Company may charge expenses to capital which may erode the capital value of the investment.
- Derivatives may be used, subject to restrictions set out for the Company, in order to manage risk and generate income. The market in derivatives can be volatile and there is a higher than average risk of loss.
- There is no guarantee that the market price of the Company’s shares will fully reflect their underlying Net Asset Value.
- As with all stock exchange investments the value of the Company’s shares purchased will immediately fall by the difference between the buying and selling prices, the bid-offer spread. If trading volumes fall, the bid-offer spread can widen.
- Certain trusts may seek to invest in higher yielding securities such as bonds, which are subject to credit risk, market price risk and interest rate risk. Unlike income from a single bond, the level of income from an investment trust is not fixed and may fluctuate.
- Yields are estimated figures and may fluctuate, there are no guarantees that future dividends will match or exceed historic dividends and certain investors may be subject to further tax on dividends.
Issued by abrdn Fund Managers Limited, registered in England and Wales (740118) at 280 Bishopsgate, London EC2M 4AG, authorised and regulated by the Financial Conduct Authority in the UK.
Find out more at www.murray-income.co.uk or by registering for updates. You can also follow us on Facebook, X and LinkedIn.