Schroder Income Growth Fund Regulatory News (SCF)

Schroder Income Growth (SCF)

18/05/2026

Results analysis from Kepler Trust Intelligence

· Schroder Income Growth (SCF) delivered a NAV total return of 17.4% for the six months to 28/02/2026, against the FTSE All-Share Index return of 18.9%. Positive performance came from stocks including Rio Tinto, SSE and Balfour Beatty. Relative underperformance stemmed largely from an unusually concentrated market, with a small number of index constituents delivering exceptionally strong returns. Long-term returns remain strong with an annualised NAV total return of 8.5% versus 7.8% for the index, since Sue Noffke took responsibility for the portfolio in July 2011.

· SCF's higher share price total return of 18.9% reflected the discount narrowing from 8.2% to 7.2% over the reported period. Given the discount, the board repurchased 803,214 ordinary shares during the half-year, equivalent to 1.2% of the issued share capital. Shareholders voted 95.8% in favour of the trust's five-year continuation vote. Further, the board noted the recommended cash acquisition of Schroders by Nuveen, expected to complete Q4 2026, with continuity of management intended.

Kepler View

We think these are good results from SCF, and the income picture is the perfect place to start, as portfolio investment income rose 17.5% over the period. This reflected a special dividend from Lancashire Holdings, alongside a solid 7% rise in underlying ordinary dividend income, supported by double-digit dividend increases from several holdings, including Prudential, XPS Pensions, Hollywood Bowl and Balfour Beatty.

Buybacks are also worth noting. At period end, 30 of SCF's 46 holdings were actively repurchasing their own shares, representing two thirds of the portfolio. For income investors this can look like a headwind, and at the market level it has modestly dampened headline dividend growth. But Sue Noffke argues that the real effect has been on dividend cover, which has strengthened considerably, making the portfolio's income more sustainable over time. She also notes that the UK market may now have reached a peak in buyback activity, with the partial re-rating of certain larger companies undermining the case for further repurchases, and capital increasingly being redirected toward organic investment and acquisitions. Among smaller and mid-sized companies, however, which have not experienced the same degree of re-rating and remain relatively lowly valued, buyback activity looks set to continue, something Sue believes could be a source of ongoing return potential for the portfolio.

SCF has also showed a level of income consistency over the long term. Dividends have compounded at 4.1% annually since 1996, against inflation of 2.5%, delivering genuine real income growth for investors. The board has made clear its intention to pursue a 31st consecutive year of dividend growth, supported by revenue reserves of 7.1p per share, covering 48% of last year's dividend, and a larger pool of distributable capital reserves. Together, we think the foundations to achieve another year of growth are in good shape.

Looking ahead, the conflict in the Middle East has complicated the inflation and rate outlook since the period end, with cuts that had looked likely this year now off the table. Top-tier cash ISAs offering above 4% will inevitably draw some investors, as they did in 2022 and 2023, but they lack the capital growth potential on offer with SCF, alongside the above-inflation dividend growth record it has cultivated since 1996. SCF's smaller company exposure remains a risk if sentiment stays cautious, but it equally represents the trust's most interesting opportunity, those valuations sit at historically wide discounts to larger peers, and any narrowing could be a meaningful driver of returns. At a 6.5% discount, with a 4.3% yield and 30 years of dividend growth ahead of inflation, we think the case for SCF is stronger than the current price suggests.

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