28th Feb 2014 14:47
LONDON (Alliance News) - Standard Life UK Smaller Companies Trust PLC Friday increased its interim dividend by 10% and reported a strong absolute return over the first six months of its financial year.
The trust will pay a 1.27 pence interim dividend, up from 1.15 pence.
Standard Life UK Smaller Companies said it expects to see strong dividend growth come through from its underlying portfolio. However, it expects the rate of growth to ease because its manager, Standard Life Investments (Corporate Funds) Ltd, has taken profits in a number of mature, higher yielding companies, with proceeds likely to be invested in younger growth companies.
Younger companies tend to pay lower dividends to shareholders as they are at an earlier stage of growth. Investors in younger companies generally look for capital growth from them.
The trust delivered a diluted net asset value total return of 17.6%, against the 21.0% provided by its benchmark, the Numis Smaller Companies Index excluding Investment Companies.
"The company's performance during the period under review can essentially be viewed in two distinct phases. From July to October, performance was weak as the company failed to keep up with the rampant bull market which favoured riskier sectors. A greater sense of realism however returned in the October to December period," Harry Nimmo, Head of Smaller Companies at Standard Life Investments, said in a statement.
"During that time, performance was helped by a couple of takeover bids, that of Delcam by the giant American software company Autodesk and Oxford Instruments' offer for Andor. By the final quarter of 2014 it was becoming clear that the economy was recovering faster than expected which, in turn, brings forward the prospect of rising interest rates," he said.
Nimmo, who was named fund manager of the decade at the Grant Thornton Quoted Companies Awards on January 29, said 2013 was a great year for UK smaller companies.
"Indeed, the asset class was among the strongest performers worldwide. The British economy improved considerably in the second half of calendar 2013, with industrial production and consumer confidence moving ahead in a sustained way," he said.
"The manager has been receiving enquiries from investor groups not normally known for investing in smaller companies."
Investors have been turning to smaller companies for growth, with low interest rates and the economic recovery contributing to the heightened interest in the sector.
The trust's shares were Friday quoted up 1.6% at 343.26 pence.
By Samuel Agini; [email protected]; @samuelagini
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