Total return of 20.7% for Merchants Trust Date: Thursday 07 Apr 2011 LONDON (ShareCast) - New chairman Simon Fraser declared himself pleased with the performance of The Merchants Trust last year, a year in which the trust achieved a total return that topped that achieved by FTSE 100 Index and the FTSE 350 Higher Yield Index. Net asset value (NAV) per share increased by 14.6% to 427.1p in the 12 months to 31 January, 2011, and when dividends are thrown into the pot as well, the total return for the year was 20.7%, against a total return of 16.8% for the FTSE 100 and 12.2% for the FTSE 350 Higher Yield indices. Net Revenue Return per share rose by 12.2% to 21.22p. This year's earnings include a release of a provision of £862,086 against finance costs in First Debenture Finance PLC. The board has recommended a final dividend of 5.7p per share, taking the full year pay-out up to 22.8p, up 1.3% on the previous year. --- jh
I've held this IT for quite a number of years and done well by it. What bothers me now is the size of the dividends - well over 8%. How do they do this? - there are almost no shares in their portfolio paying at this level. All I can think of is 1. lending shares to short sellers - that can make a bit, and 2. They have a revenue reserve which was running at 17.6 pence per share, which they could draw on to keep the dividends up. I assume they must be doing (2.). In which case it would be interesting to know how fast that is depleting and how long they can keep it up. Something like Edinburgh IT has a broadly similar portfolio but pays out way less. If it looks to good to be true then it usually is.
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