LONDON (Alliance News) - The chairman of the Troy Income & Growth Trust PLC managed by Troy Asset Management on Wednesday said it is "indisputable" that the outlook for dividend growth from UK equities is more uncertain now than it has been at any time since the financial crisis of 2007-09.
In a statement, Chairman David Warnock said the trust's investments weathered market turbulence at the start of 2016. He said dividend cuts may yet have further to go, given that some of the largest companies in the UK equity market have already gone ahead with such plans.
The chairman said the "most prominent" announcements to date came with BHP Billiton's 75% reduction in its pay-out followed quickly by Rio Tinto's announcement in February that it would be scrapping its progressive dividend policy.
"Pay-out ratios remain stretched in many sectors and those wishing to generate meaningful dividend income from the equity market will have to successfully differentiate between those yields that are sustainable and those that are optically enticing but fundamentally unsustainable," Warnock said.
The concentration of dividend income in Troy Income & Growth Trust's portfolio is "considerably lower" than that of the market as a whole, according to Warnock, who said that Troy Asset Management's investment process ensured the trust has had no exposure to 14 out of the 15 FTSE 100 companies that have either cut, or announced their intention to cut, their dividends over the last 18 months.
"This does provide some comfort but the dividend prospects of all the companies in the portfolio will require constant monitoring if the real dividend growth trajectory is to be sustained," the chairman said.
The trust, which is tasked with providing an attractive dividend yield to shareholders by investing in UK equities, said it delivered a net asset value total return of 6.2% over the six months to March 31. The share price total return of 6.7% came amid a small increase in the premium at which the shares trade to NAV, while the FTSE All-Share Index produced a total return of 3.5% over the same period.
Over one and three-year periods to March 31, the NAV total returns of 7.4% and 32.3% compared favourably to what was produced by the FTSE All-Share Index, which returned -3.9% and 11.4% over the same periods.
The trust increased the total of its first and second interim dividends by 4.35% to 1.20 pence, a quarterly rate of 0.60p, when compared with the equivalent dividends a year earlier.
Shares in Troy Income & Growth Trust were up 0.2% at 71.39 pence Wednesday.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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