Standard Life Equity Trust has announced an Interim dividend of 3.75p per share, an increase of 5.6% on the interim dividend compared with 2011.
For the six months ended 31 March 2011, the Company’s net asset value total return was 19.3% compared with an 15.0% total return on the FTSE All-Share Index and 11.7% for the FTSE 350 High Yield Index.
Over the reporting period, the share price rose from 276.5p to 284.0p, an increase of 2.7% and the total share price return for the period was 6.4%.
At the current share price of 279.5p the Company’s shares offer a dividend yield of 4.5%.
The company ranks second out of 20 peers in the UK Growth & Income sector based on net asset value total return for the six months ended 31 March 2012 (source JP Morgan Cazenove).
“The revenue return per ordinary share for the six months ended 31 March 2012 was 6.17p, representing a 16.6% increase in the earnings per ordinary share for the same period last year,” says Charles Wood OBE, Chairman, Standard Life Equity Income Trust Plc. “The Company continues to see strong dividend growth coming through from the underlying portfolio, including special dividends from Vodafone and easyJet.
“The Board is declaring an interim dividend of 3.75p per share, an increase of 5.6% on the interim dividend for 2011. As with last year, the increase in the interim dividend mainly reflects the Board’s aim of rebalancing the interim and final dividends and the Board intends at least to maintain the level of the final dividend.
“The start of 2012 saw a strong rally in UK share prices, with the European Central Bank’s Long Term Refinancing Operations bringing some stability to the market, after the volatility of 2011. Against this backdrop, cyclical stocks performed strongly and made a positive contribution to the Company’s performance.
“For the six months ended 31 March 2012, the Company’s net asset value total return was 19.3% compared with a 15.0% total return on the FTSE All Share Index and 11.7% for the FTSE 350 High Yield Index.
“The Standard Life Equity Income Trust ranked second out of 20 peers in the UK Growth & Income sector based on net asset value total return for the six months ended 31 March 2012.
“On 11 November 2011, the Board welcomed the appointment of Thomas Moore as joint investment manager to the Company. Since then, Tom and Karen Robertson have been managing the Company’s portfolio together, with Tom taking on increasing responsibility for the investment decisions. With effect from 14 May 2012, the Board is pleased to announce that Tom will become the Company’s lead investment manager, with Karen Robertson continuing to assist with the Company’s portfolio management as a key member of Standard Life Investments’ UK equity team. One of Tom’s aims, articulated at the AGM last year, is to shift gradually towards a more extensive presence in mid caps, where dividend growth has been more robust than in the FTSE 100.
“The performance of the Company’s investments has recovered sharply from the disappointment towards the end of the last financial year. While continuing to expect swings in sentiment about the global economy, the Manager has suggested that the equity market will advance this year. We do know that company margins have recovered. We also know that dividends from UK listed companies have risen overall for at least two years, reflecting greater confidence. The Board is encouraged by the rise in the underlying income of the portfolio.”
Thomas Moore, Fund Manager, Standard Life Equity Income Trust , says: “The Trust’s exposure to engineering and industrial companies was particularly beneficial over the period. Holdings in Bodycote, Fenner, IMI and Melrose were among the strongest performers in the portfolio, each benefiting from earnings upgrades. DS Smith made the largest contribution towards performance over the period. Its shares rose after the firm announced the earnings-enhancing acquisition of the packaging assets of SCA, a Scandinavian rival. Not owning Tesco was also beneficial, as the retailer’s shares fell on the back of a poor trading statement.
“On the downside, Admiral reported disappointing results and an increased level of provisions, raising fears that its management has been growing the business too aggressively. Kier also disappointed, affected by pressure on the margins in its construction business and delays to local authority outsourcing contracts.
“BT was among the major purchases made during the period. The company offers an attractive dividend yield, with further upgrades to its earnings likely as a result of cost savings and a firmer pricing environment. Other purchases included Greene King, which continues to win market share, and offers an attractive dividend yield. The Company also bought shares in Barclays. Last year’s underperformance has left the stock looking attractively priced on a variety of measures, while impairments at the bank have been reducing sharply. EasyJet, which in February made a cash return to shareholders in the form of a special dividend, was another key purchase. The airline has benefited from weaker competitors exiting the industry and has also increased its yield by focusing on increasing business passenger numbers and improving ancillary revenue.
“Sales included Intermediate Capital, which provides debt for leveraged buyouts and is likely to be affected by the weakening macroeconomic environment in Europe, Vedanta Resources, which suffered from operational disappointments, concerns over its balance sheet and ongoing geopolitical risks and Domino Printing Sciences, where economic uncertainty has delayed order-rate conversion on capital projects. We also reduced large holdings in Vodafone, which faces margin pressure, and in Fenner and Royal Dutch Shell after a period of strong share price outperformance.
“The UK corporate sector proved resilient throughout the turmoil of 2011 and balance sheets have remained robust. Dividend growth has been strong and the Company’s income from investments for the six months to 31 March 2012 was 30.1% higher than for the same period last year. Income from investments benefited from Vodafone and easyJet special dividends and a full six months of dividends from BP, following last year’s suspension. New purchases made a positive contribution to income, in particular BT and SThree.
“Despite support at the corporate level from balance sheet strength and low valuations, the key driver of the UK equity market remains swings in macroeconomic sentiment. UK companies are facing headwinds from weak consumer spending and slower European export demand but they should continue to benefit from the improving global macroeconomic picture – particularly the recovery in the US and the strong rates of growth in China and other Asian economies. On a historical basis and when compared to bonds and cash, the UK market remains attractively valued; we expect the market to make further progress this year.”