8th May 2015 06:58
LONDON (Alliance News) - Scottish Mortgage Investment Trust PLC Friday said it provided good returns in its last financial year, and explained that it dipped into its revenue reserves to increase its dividend as it focuses on growth companies rather than buying income paying stocks.
The trust, whose ten largest holdings at the end of March included online giants Amazon.com, Facebook and Google, reported a net asset value total return for the year ended March 31 of 27.7% and a share price total return of 29.6%.
The trust said its returns were ahead of the FTSE All-World Index, the benchmark, which produced a total return of 19.2% in the same period.
The trust's portfolio is managed by Baillie Gifford's James Anderson and Tom Slater.
Chairman John Scott said the trust's focus is on maxmimising total returns to shareholders and aims to do that by growing capital in the long term.
Scott said it's important that the portfolio managers are able to concentrate on finding growth companies to invest in, rather than having to "acquire short term income for dividend payments", hence why the trust's policy was changed in 2014 to remove the requirement to grow the dividend in real terms.
The dividend is valued by shareholders, according to Scott, who said the trust intends to continue to grow the dividend.
Earnings per share for the trust fell to 2.24 pence from 2.43 in the prior financial year, not an unexpected outcome according to Scott, who expects earnings will continue to fall.
"Whilst this is entirely consistent with the approach that the managers seek in their investments and ought to be positive for the long term capital return prospects of these companies (and therefore of our own), the corollary is that we expect Scottish Mortgage's earnings to continue to fall in the foreseeable future," Scott said.
The trust upped its full-year dividend by 1.0% to 2.93 pence per share, with the increase requiring the trust to use 0.7p per share of its revenue reserves to do so.
"In so doing, this will leave around 4p per share available to support future distributions. Shareholders will recognise that, while there is no immediate threat to the level of the dividend which your Company is paying, as revenue reserves deplete dividends may be constrained by prevailing earnings, subject to any future decisions on augmenting the resources from which dividends are paid with contributions from capital," Scott said.
By Samuel Agini; [email protected]; @samuelagini
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