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 has benefited from the amalgamation of Aberdeen Asset Management and Standard Life Investments (SLI), with the SLI side having had a much larger UK equity team, offering in-depth, sector-based research coverage of the whole FTSE 350 Index, as well as access to Harry Nimmo’s UK small-cap team. However, MUT Manager Charles Luke’s approach remains largely unchanged: seeking quality businesses at reasonable prices, with attractive yields and dividend growth prospects. The 30–70 stock portfolio is diversified by sector, geography and company size.
Following the broad-based market sell-off in the second half of 2018, markets have begun 2019 in a more optimistic vein. However, the factors underpinning last year’s volatility – such as slowing global growth, trade tensions and Brexit uncertainty – persist, meaning investors should not become complacent. A more reasonable level of P/E valuations, supported by continued earnings growth, provides a measure of comfort, and dividends should prove an important component of total returns.
At 30 January, MUT’s shares traded at a 5.9% discount to cum-income net asset value. This was narrower than the average discount of 8.3% over one year, following share price outperformance of the NAV during the market volatility in 2018. MUT has an active discount management policy and, while there is no publicly stated level at which it will repurchase shares, it has tended to buy back at discounts exceeding c 9%. MUT currently offers a 4.5% dividend yield.