“Contrarian” investment strategy sees Scottish Investment Trust up dividend

Alasdair McKinnon
Alasdair McKinnon

The Scottish Investment Trust has reported that net asset value per share increased to 924.40 pence at October 31, from 854.90p at the same time the year before.

The rise comes on the back of its continuing “contrary” investment strategy and as it made a “significant step change increase” to its regular full-year dividend which in creased by 48 per cent to 20p.

The firm, which has continued to invest in the unfashionable oil sector, also recommended the payment of a 5p special dividend for the year ended October 31, meaning its total dividend has been raised by 11 per cent.

Despite the prolonged period of languishing global oil prices, the Scottish currently has positions in big names including Royal Dutch Shell, Total, Chevron and Exxon Mobil.

The Trust’s Sarah Monaco, said: “We’ve watched them since the oil price dived and they’ve really been working very hard to cut costs, reduce capex , build up cash and really support their dividends.”

She added: “They are at the point where they are really well placed for the future and I think the long-term outlook for oil is a lot better than some of the markets are giving credit for.

“I think there will be a supply and demand balancing point coming along soon.”

Trust manager Alasdair McKinnon said such businesses fit with his team’s strategy of buying companies that other firms may be sleeping on.

“We want to buy the things people have already sold,” he said.

“We are confident this is an attractive style, buying assets at the point when no-one else likes them.”

Mr McKinnon said the trust’s unorthodox approach makes it difficult to benchmark itself against any particular market index, although the latest results mean it did marginally underperformed both UK and international equity markets.

James Will
James Will

Also commenting on the Scottish’s strategy, Chairman James Will said: “Since the adoption of the contrarian investment approach, income generated has been considerably more than that required to pay the regular dividend. The Board has discussed this extensively with the Manager and, despite the approach not explicitly targeting high yielding investments, we expect the contrarian investment style to generate a higher level of investment income through an investment cycle than was previously the case. A higher than average level of dividend income is often, but not always, a consequence of an investment in an unfashionable company.”

On the back of the strategy, the trust made a net asset value total return of 11 per cent against 13.3 per cent from the MSCI All Country World Index and 13.5 per cent from the MSCI UK All Cap Index.

Going forward, the Scottish said it will target dividend growth “ahead of UK inflation”.

While publishing its latest results, the firm also welcomed Karyn Lamont on to its Board.

Ms Lamont was appointed as a non-executive director and Chair of the Audit Committee in October 2017. Chairman James Will said she brings a wealth of specialist audit experience from her long career in the field and will stand for election at the Annual General Meeting.

Ms Lamont will replace Ian Hunter who retired after three years of valuable service to the Company.

Meanwhile, Hamish Buchan is also set to retire at the AGM.

Mr Will said:” The Company has benefited greatly from Hamish’s knowledge and experience over the last fourteen years. On behalf of the Board, I should like to thank Hamish for his outstanding contribution.  There is no current intention to replace Hamish as the Board considers that its membership will continue to ensure that the appropriate balance of skills, experience, independence and knowledge will be achieved.”