Why Income Seekers love the Troy Story
In the press•Published date 12 January 2020
There is no doubt Troy Asset Management has transformed for the better the fortunes of an investment trust it took over more than ten years ago.
Long-standing shareholders in Troy Income & Growth have been rewarded for their loyalty with an attractive combination of dividend and capital growth. An investment of £1,000 made in January 2010 would now be worth nearly £2,700 – assuming all income had been reinvested.
An investment journey more financially beneficial than tracking the FTSE All-Share Index (where £1,000 would have grown to just over £2,000).
The trust, previously known as Glasgow Income and managed by investment house Aberdeen, was taken over by Troy in July 2009 and given a complete makeover.
The result is a £274million trust that now invests primarily in UK companies, has grown its dividend every year since 2009, and goes out of its way to preserve investors’ capital. It is conservative with a small ‘c’.
For just short of the past five years, the trust has been managed jointly by Hugo Ure and Francis Brooke.
Ure says the over-riding objective is to create a portfolio that has the ability to navigate key events, be they political (last month’s General Election) or geopolitical (the current face-off between Iran and the United States in the Middle East).
He adds: ‘It’s about creating a balanced portfolio, one robust enough to withstand all events, be they known of in advance or of a surprise nature.’
The portfolio comprises 46 stocks, plus four per cent in cash. Top ten holdings in BP and Royal Dutch Shell, say Ure, should ensure the trust benefits from the surge in oil prices caused by the heightening of tensions in the Middle East.
In recent years, the trust has been quietly weaning itself off dividend-friendly utility companies because of the tougher regulatory structures, compromising their ability to keep growing dividends. Positions in water companies Pennon and Severn Trent, utility giant Centrica (owner of British Gas) and Vodafone have all been disposed of.
Instead, there has been a focus on companies with lower starting dividend yields, but offering the prospect of sustained income growth.
This change in strategy has put pressure on the trust’s ability to keep growing the dividends it pays investors – although it has the equivalent of half a year’s dividends squirrelled away in income reserves that can be drawn upon to top up payments if necessary.
In the financial year to the end of September 2019, it drew upon these reserves to part fund the three per cent increase in annual dividend to 2.75 pence per share – and it will do the same if necessary this year to sustain dividend growth. ‘We want to grow the dividend in real terms – at least in line with inflation,’ says Ure.
The trust’s annual management charge is competitive at 0.65 per cent, while the board is keen that shareholders can realise their investments without worrying about whether their shares are trading at a discount to the value of their underlying assets.
This is done through use of a ‘discount control mechanism’ – the board either issuing new shares or buying them back – that ensures the trust’s shares trade at close to asset value. Ure says shareholders, as a result, can sell their holdings at a ‘fair price’ and ‘time of their choosing’.
Bloomberg/Epic/Reuters code: TIGT; Sedol: 0370866.