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MUT has raised its dividend for 51 consecutive years…
Murray Income Trust PLC
Edison Investment Research is terminating coverage on VolitionRx (VNRX), Murray Income Trust (MUT) and NioCorp Developments (NB). Please note you should no longer rely on any previous research or estimates for this company. All forecasts should now be considered redundant. Previously published reports can still be accessed via our website.
Murray Income Trust (MUT) invests in high-quality, mainly UK-listed stocks. MUT’s manager, Charles Luke, believes quality stocks are best placed to support the trust’s objective to provide a high and rising dividend. The trust has realised this objective, delivering continually rising dividends for 51 years, and looks set to extend this record in FY25. MUT’s quality focus has undermined its relative performance over recent years, as value stocks have outperformed, but long-term performance has been positive and close to the benchmark, satisfying MUT’s capital growth goal. And Luke is optimistic about the prospects for UK equities, especially the quality businesses he targets. Investors have been underweight this market for some time, suggesting a rise in inflows is overdue, especially as the UK’s political environment has stabilised. Furthermore, declining interest rates should encourage greater M&A activity as investors seek to take advantage of valuations that Luke believes remain ‘compelling’.
MUT continues its impressive streak of consecutive dividend increases hitting half a century in 2023…
Murray Income Trust (MUT) invests in high-quality, mainly UK-listed stocks. It has achieved both its dividend and capital growth objectives over the long term. The trust boasts 50 years of continually rising dividends. It paid a dividend of 37.5p per share in FY23 (ended 30 June 2023 (FY22: 36.0p)), and the board has indicated the dividend will rise to at least 38.0p in FY24. This represents a prospective yield of 4.5%. Late last year the company decided to take action to allow shareholders to access dividend income more quickly and more evenly throughout the year, by smoothing quarterly dividend payments. MUT has also delivered absolute gains and outperformance of the market and most of its peers over the longer term, returning an annual average of 6.1% in NAV terms over the 10 years ended 31 March 2024, versus an average market gain of 5.8% pa. The trust’s managers view UK equities as very attractively priced at current levels and expect the portfolio’s quality holdings to outperform as and when UK stocks return to favour with investors.
Investec view: Murray Income has just celebrated its 100th anniversary and looks well placed to deliver an increase in dividends for a 51st consecutive year; these are impressive achievements. The Chair notes that Murray Income “has prospered over the years through multiple economic, social and political crises and there are many good reasons to believe that it will continue to thrive in the years to come”. With storm clouds gathering over both the UK equity market and the investment company industry, this statement is rather timely. We like the focus on high-quality companies with robust balance sheets and strong and predictable cash flows. We highlight the premium weighted average return on equity (20.7% vs. 15.8% for the FTSE All-Share) and return on assets (7.5% vs. 5.3%), although a corollary is that the portfolio P/E multiple is 14.5x vs. 11.5x. Meanwhile, on a look-through basis, overseas revenue is approximately 75% of the total, with non-UK equities representing 21% of NAV. In a world obsessed with short-term performance, on page 2 we show the five-year risk/returns for an extended UK Equity Income peer group, comprising 90 open-ended funds and investment companies; encouragingly, Murray Income is ranked a highly credible 8th. Well documented headwinds, including significant selling by both domestic and international institutional investors in recent years, have resulted in the UK equity market trading at a substantial discount relative to both historical levels and global markets. Meanwhile, the discount of Murray Income has come under increasing pressure and is now close to multi-year highs. Although it may be challenging to identify a near-term catalyst for a reversal in sentiment (a classic contrarian buy signal), these characteristics provide a significant margin of safety, while an attractive dividend yield of 4.6% has clear attractions. We maintain our Buy recommendation. Investment philosophy focussed on the identification of good quality companies at attractive valuations: The manager defines quality companies as those capable of strong and predictable cash generation, sustainably high returns on capital, and with attractive growth opportunities over the longer term. These typically result from a sound business model, a robust balance sheet, good management, and strong ESG characteristics. Continued overleaf
Murray Income Trust (MUT) is currently celebrating two key milestones. This year marks its 100-year anniversary, and 50 years of consistently rising dividends. MUT’s FY23 dividend of 37.5p (up from 36.0p in FY22) represents a current yield of 4.7% and MUT’s board has stated that maintaining the trust’s record of annually increasing dividends remains a priority. Performance has improved after a rare bout of underperformance last year. In the year ended September 2023, MUT returned 14.5%, in line with the benchmark, and in the 10 years to September, it delivered an average annual return of 6.1% on an NAV basis, versus a market return of 5.6%. The trust’s managers, Charles Luke and Iain Pyle, are confident its exposure to some ‘unstoppable long-term trends’ means it is well-positioned to continue delivering positive returns and growing income over the long term.
Murray Income Trust (MUT) marks its 100-year anniversary this year. It invests mainly in UK equities and aims to provide capital growth and a high and growing income. The trust continues to meet these three objectives. Recent absolute and relative performance has improved after a rare bout of underperformance last year, as the merits of MUT’s high-quality portfolio holdings reassert themselves. In the six months to end April 2023, the trust returned 15.8% on an NAV basis, versus a market return of 12.8%. The trust is also on track to meet another milestone: 50 successive years of dividend growth. The FY23 dividend is expected to be at least 36.5p, which represents a prospective yield of 4.2%. MUT’s manager, Charles Luke, is confident the trust is well-positioned to continue delivering positive returns and growing income over the long term.
Murray Income Trust (MUT) invests mainly in UK equities and aims to provide a high and growing income, combined with capital growth. The trust is meeting these three objectives. The FY23 dividend is expected to be at least 36.5p, putting it on track to deliver its 50th consecutive year of dividend growth. This represents a prospective yield of 4.4%. MUT has underperformed during this year’s market rotation away from the quality companies favoured by manager Charles Luke. However, the trust has slightly outpaced the market over the long term on an NAV basis; in the 10 years ended October 2022, MUT’s average annualised NAV return was 6.7%, compared to an average market return of 6.3%.
Murray Income Trust (MUT) invests mainly in UK equities and aims to provide a high and growing income, combined with capital growth. Its quality bias has resulted in underperformance during the recent rotation away from the quality and growth stocks favoured by manager, Charles Luke. However, the trust’s long-term track record of outperformance of the market and its peers confirms that Luke’s approach pays off over time. Over the ten years to end March 2022, MUT has generated an average annualised return of 8.1% on an NAV basis and 7.7% in share price terms, compared to a market return of 7.2%. The trust’s FY22 dividend is expected to be at least 34.75p, putting it on track to deliver its 49th consecutive year of dividend growth. This represents a prospective yield of 4.1%.
Investec view: The management team led by Charles Luke has a clear and distinct investment philosophy with a focus on identifying high quality companies which are capable of strong and predictable cash generation, sustainably high returns on capital and with attractive growth opportunities. These companies typically display sound business models, robust balance sheets, good management and strong environmental, social and governance characteristics. Murray Income has increased its dividend for 48 consecutive years and dividend growth remains an integral focus of the Board and Manager. The company has significant revenue reserves to help support the dividend, although we note that the Chairman remarked that the Board hopes to again be in the fortunate position of having to decide how much of this year’s income to pay out as a higher dividend and how much to put into revenue reserves. Current revenue reserves amount to 12.9p/share or c.37% of last year’s dividend. The portfolio has performed resiliently against a challenging backdrop. Link reported that calendar year 2020 dividends for the UK market fell 44% compared to 2019 levels, while 2021 dividends (on an underlying basis) were up 22% on 2020. However given the manager’s focus on good quality companies, capable of strong and predictable cash generation, the portfolio’s experience was considerably different. Portfolio income fell 13% in 2020, followed by a recovery of 11% in 2021. The manager expects portfolio income to reach new highs in 2022, and, whilst perhaps not repeatable, this places the company ahead of its original forecasts. Murray Income provides investors with exposure to a portfolio of high quality companies with attractive growth prospects and appealing dividend characteristics via a proven investment process. Whilst there are a number of significant challenges on the horizon, not least inflation, monetary tightening and war in Ukraine, we believe the company remains well-placed to deliver attractive returns and a progressive dividend. We reiterate our Buy recommendation. Impressive long-term performance record: The NAV and shareholder total returns for the six month period were 7.2% and 7.5% respectively, ahead of the benchmark return of 6.5%. Over the longer term, the returns are impressive; over five years the NAV and shareholder total returns are 47.3% and 56.8%, significantly ahead of the FTSE All Share which has returned 30.2%. Continued overleaf
Murray Income Trust (MUT) has just marked the first anniversary of its merger with Perpetual Income & Growth Investment Trust (PLI). This merger doubled the trust’s assets under management, improved the liquidity of its shares and delivered a significant reduction in its already competitive fee. MUT invests mainly in UK equities and aims to provide a high and growing income, combined with capital growth. Its quality bias ensured that its revenues proved very resilient during the pandemic, despite widespread dividend cuts. This allowed MUT to deliver its 48th consecutive year of increased annual dividends in 2021 and the board is expecting to maintain this record in future. The current dividend yield is 4%. After a rare and brief period of underperformance in late 2020 and early 2021, recent performance has improved. MUT has also outperformed the broad UK market over the longer term, delivering an annualised average return of 8.8% on a NAV basis and 8.0% in share price terms, compared to a market return of 7.3% over the past 10 years.
Murray Income Trust (MUT), managed by Charles Luke and Iain Pyle at abrdn, looks to invest across a broad range of companies to achieve a high and growing income combined with capital growth. The trust is conservatively managed, so Charles and Iain aim to have a sensibly diversified portfolio. They ensure that the portfolio is not overly exposed to one economic scenario and therefore like to invest in a broad range of companies. Capital and income exposure to any one company is capped at around 5% of the portfolio. Additionally, Charles and Iain look for strong ESG characteristics which the experienced team at abrdn provide support in identifying. At a current 6.8% discount, the share price rating has widened from a short lived 2.5% premium one year ago. The trust has delivered 48 consecutive years of dividend growth, notably maintaining the dividend during the COVID-pandemic. At the time of writing the dividend yield is 3.9% (02/12/2021). Primarily, holdings are listed on the UK market, but the trust can invest up to 20% of the portfolio overseas. This allows for diversification of risk and allows access to companies and themes outside the UK market. Charles and Iain believe this allows them to maintain the quality of the portfolio despite its income mandate, as we discuss in the Portfolio section. In November 2020, the trust merged with Perpetual Income and Growth Investment Trust (PLI) which has led to gross assets rising to over £1bn. Charles tells us that absorbing the extra assets was seamless and post the merger, MUT is cheaper in terms of OCF and bid/offer spread, to the benefit of shareholders.
Murray Income Trust (MUT) invests in a diversified portfolio of mainly UK equities. It focuses on quality stocks and aims to provide a high and growing income, combined with capital growth. MUT’s merger with Perpetual Income and Growth Investment Trust (PLI) in Q420 doubled the trust’s assets under management and is expected to deliver a reduction to its already competitive fee. The income MUT provides to investors has proved very resilient during the pandemic, despite widespread dividend cuts – the trust delivered its 47th consecutive year of increased annual dividends in 2020 and the board is committed to maintaining this record in future. Recent relative performance has been challenged by the rotation into cyclical and value stocks, which has seen the quality companies MUT targets underperform. However, the trust has outperformed the broad UK market over the longer term and outpaced its peers over three and five years. The trust’s manager, Charlie Luke, believes the recent rotation into cyclical and value stocks will prove short-lived. He intends to maintain his focus on higher-quality companies that should thrive in the current tough environment and emerge over time in a stronger competitive position.
Murray Income Trust’s (MUT) recent combination with Perpetual Income and Growth Investment Trust (PLI) has doubled the trust’s assets under management to £1.1bn and is expected to deliver a substantial fee reduction to investors. MUT invests in a diversified portfolio of mainly UK equities and aims to provide a high and growing income, combined with capital growth. It has achieved these objectives, having just delivered its 47th consecutive year of increasing annual dividends, while also outperforming its benchmark (a broad UK stock market index) and most of its peers over both the short and longer term. Manager Charles Luke’s success – even in the current climate, which has been characterised by widespread dividend cuts – confirms his conviction that ‘quality, sustainable and growing income is out there, if you know where to look’. He intends to maintain his research-intensive search for resilient companies capable of growing future earnings and dividends over time.
Murray Income Trust (MUT) aims to provide a high and growing income combined with capital growth, through investment in a diversified portfolio of mainly UK equities. It has achieved these objectives both recently and longer term, delivering 46 consecutive years of increasing annual dividends, and outperforming its benchmark (a broad UK stock market index) and most of its peers during the recent market turbulence and over the long term. Manager Charles Luke’s approach is based on identifying dependable stocks, which have the capacity to weather downturns, and on diversification across income, capital and sector. He focuses on high-quality companies, including mid-caps, which he believes produce less volatile income streams and are better placed to navigate uncertain times and capitalise on opportunities to create value over the longer term.
Investec view: Another impressive set of results and the manager is now putting together an impressive longer-term record; over five years, Murray Income is ranked 9th out of a peer group of 100 UK equity income open and closed-end income funds over five years. The company has now established solid foundations, and providing it can extend these strong numbers we would expect the shares to move to a premium rating in the coming months. While there are many challenges facing global stock markets, the removal of political uncertainty has been a catalyst for stronger returns in the UK, although valuations remain relatively attractive after a sharp de-rating in recent years. Meanwhile, the manager notes that the new Chancellor has the option to stimulate the economy with fiscal easing and infrastructure spending, and this has the potential to provide a significant tailwind for future growth. We reiterate our BUY recommendation. Robust outperformance of benchmark: NAV and shareholder total returns were 9.0% and 7.7% vs. a FTSE All Share total return of 5.5%. Good stock selection was again a key driver of this outperformance and this reflected two broad themes in the portfolio. There is a strong tilt towards high-quality domestically orientated mid-caps which performed strongly (Countryside Properties (+1.0% contribution to relative returns), Howden Joinery (+0.3%), Assura (+0.3%) and Close Brothers), while the portfolio is underweight some of the largest companies which struggled (Shell (+0.9%), HSBC (+0.5%) and BP). The Chairman notes how MUT is ahead of this benchmark over one, three, five and ten years to 31 December 2019. The annualised excess returns above the benchmark over 10 years is 1.5%. The current year has started well for the company, with the NAV total return 2.4% ahead of FTSE All Share. Strong performance relative to UK equity income peers: The Board looks at the performance of the company against other investment companies in the UK Equity Income sector; on a NAV total return basis, the company is ranked third out of eighteen over one, three and five years. Extending this analysis to include all UK equity income open and closed-ended funds, the company is ranked 15th out of 112 companies over one year, 10th out of 105 companies over three years and 9th out of 100 companies over five years. Cont’d overleaf
Murray Income Trust (MUT) has significantly outperformed its FTSE All-Share Index benchmark and the majority of peers over the past year, in large part due to its focus on high-quality companies with strong balance sheets, which have held up better than others in recent bouts of market volatility. Manager Charles Luke takes a long-term approach, giving time for company fundamentals to win through and reducing trading costs. The trust has an increased focus on mid-cap and smaller companies (now c 30% of the portfolio) and also has the ability to invest up to 20% (currently c 11%) overseas. The manager highlights MUT’s attractive income characteristics, with a 4.0% yield, above-average dividend growth and dividend security, and a 46-year record of increasing its annual payouts.
The NAV total return was 7.9%, comfortably in excess of the FTSE All Share total return of 0.9%. A key driver of the excess returns was strong stock selection, where there is a distinct focus on quality; notably attribution was broadly based with financials, basic materials and technology particularly strong. A material improvement in the relative performance was rewarded with a narrowing in the discount, resulting in a shareholder total return of 13.2%. The manager has focussed on further improving the quality of the portfolio, maintaining the focus on capital and dividend growth, and diversifying sources of income. New large cap additions were Smith & Nephew, St James’s Place, LSE and SSE, while the manager bought seven new mid and smallcaps: Ashmore, WH Smith, Inchcape, Countryside, Marshalls, Howden Joinery and Sirius Real Estate. Portfolio sales included those that have performed well but which the manager belies are now expensive, including Compass, Unilever, Microsoft and Hiscox. Total dividends increased by 2.3% to 34p/share, the 46th year of consecutive increase. Meanwhile, principally as a result of the change in allocation policy (70% capital/30% revenue, from 50%/50%), EPS increased by 3.9% to 34.9p/share; this enabled the Board to add a further £0.65m to the revenue reserve which now represents 37.8p/share or 111% of the total annual dividend. The company is proposing a dividend policy change that will see it pay out four interim dividends rather than the current three interims and one final dividend. This will allow the dividend to be paid out at three monthly intervals rather than having to wait for shareholder approval of the final dividend at the AGM. ESG is one of the key components of the manager’s investment philosophy, and ESG considerations are deeply embedded in company analysis. Here, the manager is able to draw on Aberdeen Standard Investments’ ESG team, which has more than 30 specialists. The manager notes that, while the UK market remains relatively attractive, dividend yields are generous, and global asset allocators are underweight, it is difficult to be confident about the outcome of Brexit or the US-Sino trade war. Against this backdrop, the manager is intensely focussed on the identification of good quality companies, with strong competitive positions and robust balance sheets under the stewardship of experienced management teams, while remaining disciplined about valuations. Continued overleaf
Murray Income Trust (MUT) seeks to provide investors with a high and growing income, as well as capital growth, by investing mainly in UK equities. Lead manager Charles Luke and deputy manager Iain Pyle run a relatively focused portfolio of 30–70 companies chosen for their attractive yields and dividend and capital growth prospects. They seek good-quality businesses with strong balance sheets and competitive positions, and may invest up to 20% of the portfolio overseas in order to diversify sources of income, and access opportunities unavailable in the UK. Following the merger of Aberdeen Asset Management and Standard Life, MUT has access to a significantly expanded UK equity team, with in-depth coverage of large, medium-sized and smaller companies, and has increased its exposure to higher-growth mid and small caps as a result. MUT has a 45-year record of dividend growth and currently offers a yield of 4.5%, above the average for its AIC UK Equity Income peer group.
MUT is a yielding (4%) defensive income grower that is unlikely to trouble the giddy heights of the top of the performance table. Its virtues lie in its relative conservatism, limited leverage, portfolio performance characteristics and ability to continue to grow the dividend. If MUT shoots the lights out, ask what went wrong.
