picstloup
08 Aug 2017
I'm out Decent yield but lacklustre capital growth, so I've sold my modest holding of these.
schwee
17 May 2017
Re: Merchants ups dividend for 35th year If the Directors had faith in the manager, they would not be wasting £300k on marketing expenses, itself a £100k increase on the previous year. Time for a change.Sadly only about 30% of the expensive debt matures in January, the remainder not until 2029.
Ben Alligin
30 Mar 2017
Merchants ups dividend for 35th year From: [link] ups dividend for 35th year but trails FTSENot enough mining shares and too many smaller companies prevented highly geared Merchants Trust from beating FTSE 100 last year.Merchants Trust (MRCH) has increased its dividend for the 35th year in a row but its overall performance lagged the FTSE 100 in its last financial year.Annual results from the £680 million UK equity income fund show that in the year to 31 January it achieved a total return on its portfolio of 14.9% in 2016, behind the 21.4% growth from the blue chip index. Allianz Global Investors’ Simon Gergel, who manages the trust, said while Merchants benefited from ‘exceptional gains’ in some of its largest holdings, such as Royal Dutch Shell (RDSA), BP (BP) and HSBC (HSBA), like many other dividend-seeking funds it had failed to fully exploit the rebound in mining stocks in the first half of its year.‘The portfolio benefited from the mining shares Antofagasta (ANTO) and BHP Billiton (BHP) more than doubling,’ he said.‘However, the FTSE 100 index was even stronger than the portfolio…as the mining and oil sector had an even bigger impact there.’Not owning Glencore (GLEN) and Rio Tinto (RIO) blunted returns but the single worst stock held in the portfolio was satellite operator Inmarsat (ISA) which plunged 45% over the 12 months.Small and medium-sized companies, which make up a third of the portfolio, also failed to keep up with their large cap counterparts, further hitting Merchants’ relative performance.It wasn’t all bad news for the trust as it increased its dividend for the thirty-fifth year in a row, paying out a final dividend of 6.1p to give a total dividend for the year of 24.2p, a 0.8% increase on the previous year, but below the rate of inflation.Gergel said further increases would be supported by payments from companies outside of the UK being translated into sterling and he was unconcerned about companies scaling back dividends. ‘A year ago there was considerable media focus on the risks to dividends at many large UK companies.’‘However, the outlook is much improved for the four largest income contributors in the portfolio which all maintained their ordinary dividends. The oil majors Royal Dutch Shell and BP have slashed investment spending to support cashflows and they benefited from a recovery in the oil price,’ he said.Gergel said GlaxoSmithKline (GSK) also improved profitability and cash flow after an asset swap with Novartis and HSBC bolstered capital via asset sales as well as benefiting from rising US interest rates.‘These four companies contributed £11.4 million of dividends in aggregate last year, representing approximately 38% of the portfolio’s income.’Given the unpredictable outcome of last year’s Brexit vote and US election, and the even more unpredictable nature of the stockmarket reaction, Gergel said he would continue to focus on company valuations. ‘There are many businesses with strong competitive positions offering the combination of an attractive dividend yield and the potential for capital gains,’ he said.‘Two major areas offer particular value; selected ‘mega-cap’ companies and recovery situations,’ he said.In the mega-cap area, Gergel said Shell, BP, Glaxo and HSBC ‘still offer good value’ with dividend yields of 5% or more. Within recovery situations, he highlighted cruise company Carnival (CCL) and cement and building materials company CRH (CRH) as company ‘trading well below their long-term intrinsic value’.Merchants offers a dividend yield of just over 5%, one of the highest in the UK Equity Income sector which has an average of 3.6%, according to the Association of Investment Companies. This is largely a result of its gearing - or borrowing - which at 18% is double the sector average. Overall shareholder returns have been more muted, however. Over f
Richygm
13 Mar 2017
Re: merchants weak performance due to "Now anyone selling BT at 300p on the days just after they fell from 380p and not waiting for the obvious recovery is destroying value..."I entirely agree. Any experienced investor will know that in cases like that, the mms tend to mark a stock down heavily in order to play safe, and, if you wait a few weeks bargain hunters will come in and the price will tend to go back up, especially with a major co such as BT. I too often sold quickly in my early days and usually lived to regret it. I think I'll give this trust a miss. At least, until they get a new manager.
the last night trader
13 Mar 2017
merchants weak performance due to The very bad and naive timing of the investment manager! For example in Janauary's update they said"There were a number of trades within the portfolio during January. We added to Legal & General, the life insurance company, which offers a high dividend yield and growth potential from its bulk purchase annuity and investment management divisions. We sold BT after its profit warning. Although the recent purchase of EE provides cost saving opportunities, and the ability to cross sell the UK’s best fixed line and mobile networks, the profitability and cash flow of the business will be significantly lower than we previously thought, leaving less spare room for increasing pension costs, dividends and capital investment."Now anyone selling BT at 300p on the days just after they fell from 380p and not waiting for the obvious recovery is destroying value ..... just look that BT is 340p PLUS within the next 6 weeks. There are other examples that stick in my mind like selling HSBC before they got over 550p....I have loads of these, I bought a few years ago when the yield was 6.3% and NAV discount was 20%, they have unperformed and the dividend rises have been pathetic.However the expensive gearing will disappear within the next 18 months, that may add some upside. however we really need a new manger who can read the market and individual company situations better!
strapuk
13 Mar 2017
Re: More.... Thanks for you thoughts Richy. Will certainly look at Electra and Brec.
Richygm
12 Mar 2017
Re: More.... I can't comment on the others because I'm not familiar with them. My major UK holdings are Woodford Inc, which has tapered off, Electra Private Equity, which has been outstanding, and BRSC, which, after an initial Brexit plunge, has done very well. It also has a good long term record, with yield doubling every five years or something like that (which should take it up to about 7% in ten years' time). It is, however, pretty volatile.Most of my other holdings are ex-UK, and they've done outstandingly well due to the falling pound. I intend to hold on to them, because I feel that even if the pound is oversold right now, and due a comeback, it will continue to fall long-term due to the actions of UK governments.
strapuk
12 Mar 2017
Re: More.... Yes I noticed the rather flat performance. I was considering this as a replacement for MGHI when that is would up later this week, but not with such a flat growth record.Decided to split the proceeds equally between BSIF (decent yield and semi-RPI protection), Regional REIT (decent yield and a good diversification of my other property holdings) and PEY (decent yield and growth prospects plus a play on Brexit going wrong short term - I fell long term Brexit will be good for UK and the EU will gradually fall apart).Any thoughts on why MRCH would be a better option than these? Am a major holder of CTY as well so my portfolio was heavily UK weighted with MGHI and EDIN, so looking to diversify a bit anyway, but would welcome any views.
Richygm
12 Mar 2017
Re: More.... This was recommended in the IC as a good way to play the possible switch from growth to value stocks. I note, however, that over ten years the performance has been almost flat, so what you are getting is more or less only the yield. That's not bad, of course, unless inflation takes off and interest rates start rising. The other thing I note is that the top holdings are in companies that are more or less running themselves down in order to maintain their high dividends.The trust was recommended by John Barron, who is a big supporter of Brexit. I have a suspicion that the move is going to do much more damage than anyone has suspected, and so my faith in UK equities does not equal his. Time will tell, I suppose.
Warren Buffoon
02 Jan 2017
More.... Ah well, I'm buying some more. What's bad about a 5.3% divi . . . . .
II Editor
11 Jul 2016
NEW ARTICLE: Six core fund choices for a £50,000 windfall "It's a year since we presented some of our leading investment writers with the generous gift of a hypothetical £50,000 and invited them to split it as they wished between two holdings - one sturdy core holding and one more speculative choice.This ..."[link]
Warren Buffoon
11 Dec 2015
After 33 years After 33 years of investing, this is my first investment trust purchasse.Good ideas or am I just getting bored?We'll see. . . .
