Page 7 - DIY Investor Magazine | Issue 41

ACHIEVING DIVIDEND GROWTH
Our simple thesis is that for a company in the portfolio to grow its dividends, it needs to grow its earnings. To do this, it should have a sustainable competitive advantage, such as intellectual property, brands, scale, or a powerful network effect, be led by an experienced management team, have sound financial characteristics and robust growth opportunities.
We recognise that people in retirement rely on the income we provide. That means they don’t want surprises. As a result, we’re not interested in companies with very high dividend yields: it’s generally a warning sign that the dividend is likely to be cut. Instead, we’re keen to invest in businesses providing earnings resilience and sustainability, less volatility and with a greater margin
of safety. In other words, companies that are more likely to deliver on their dividend aspirations.
Avoiding nasty surprises also requires effective diversification: the unexpected can always happen.
The Murray Income portfolio is around 50 holdings – enough to make each holding count, but not enough
to flatten out to a mean. We have thoughtful diversification with, as a rule of thumb, not more than 5% of the
capital or 5% of the income coming from any one particular company.
‘WE’RE KEEN TO
Our overseas holdings INVEST IN BUSINESSES
add to this diversification. PROVIDING EARNINGS
We can invest up to RESILIENCE AND
20% of the portfolio in SUSTAINABILITY, LESS
overseas-listed companies. VOLATILITY AND WITH
This gives us exposure AGREATER MARGIN
to companies and
OF SAFETY.’
industries not available
to UK only investors. That includes companies such as L’Oreal in cosmetics, LVMH for luxury goods, Kone for elevators, Mastercard for payments and Microsoft
for technology.
UNSTOPPABLE LONG-TERM TRENDS
Finding pockets of growth in the global economy is vitally important to ensure retirement savings keep pace over time. Companies exposed to these trends have
a natural tailwind.
AstraZeneca and Convatec, for example, benefit from ageing populations, SSE and Rotork can ride on the coat tails of the energy transition. The increasing wealth of the middle classes in emerging markets should help Unilever and Inchcape. Finally, the dynamic of digital transformation should benefit holdings such as Sage, Experian and Relx.
‘VITALLY IMPORTANT TO ENSURE RETIREMENT SAVINGS KEEP PACE OVER TIME’
Investing in great quality companies that are able to grow their earnings and dividends over time should allow the trust to continue its long track record of dividend growth. This is vitally important for investors in retirement, allowing them to preserve the purchasing power of their investments over time.
MURRAY INCOME TRUST: MAY 2024 UPDATE
Charles Luke, Fund Manager of abrdn Investment Trusts Murray Income Trust discusses the strategic benefits of investing in overseas-listed companies. With the ability to allocate up to 20% of gross assets to non-UK businesses, Luke highlights the added diversification and access to high-quality industries this strategy provides.
WATCH VIDEO 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.
7 DIY Investor Magazine
· August 2024