Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Schroder Income Growth. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
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Overview

Schroder Income Growth (SCF) aims to provide real growth of income, in excess of inflation, while growing capital for investors. The long-serving lead manager, Sue Noffke, invests primarily in above-average yielding UK equities, but also has the capability to invest up to 20% of the portfolio outside the UK.

Over the past five years the trust has been an impressive performer, outperforming the benchmark (FTSE All Share), the AIC UK Equity Income peer group and the open-ended peer group. Despite a tough 2018, the trust has recovered well in 2019 and has delivered close to 12.6% (to the 22nd of May), outperforming the benchmark and the peer group by c.1% respectively. Alongside strong capital growth, the trust has delivered outstanding long-term dividend growth. The trust is an AIC Dividend Hero, having increased dividends for each of the past 23 years. Currently, the trust yields 4.1%.

Fundamental research sits at the heart of the process and the experienced team look to take advantage of market inefficiencies, identifying out of favour companies that will outperform over the long term. Typically a holding will be within the portfolio for 5-7 years, however, the manager has no issue cutting her losses should the investment proposition change. Currently, the manager believes there are a vast amount of opportunities within the UK, as relative valuations remain low in a historical context and comparable companies that are domiciled elsewhere trade at considerably greater valuations. As such, only 2.7% of the portfolio is domiciled outside the UK. The largest overweights within the portfolio are towards media, financial services and personal goods, and underweights are towards beverages and banks.

Over the past few years the discount has narrowed somewhat, and it now trades at 4.1%. This is in line with the sector average but is 2.5% narrower than the trust's 12-month historical average (to the 22nd of May) of 6.6%.

Kepler View

There is plenty to like about Schroder Income Growth. The manager has an exceptional track record for not only outperforming the benchmark, but also for delivering dividend growth. Few trusts are able to boast the track record of dividend increases that Sue can, and the high level of revenue reserves makes it appear to be maintainable going forward.

Currently the portfolio is positioned to take advantage, over the long term, of the pessimism towards the UK. Obviously, this could mean that there continues to be volatility with the sector, however, should we see the issues surrounding Brexit resolve and the outlook for the global economy improve, SCF should stand to benefit.

Currently trading on a discount of 4.1%, the trust is trading in line with peers. However, we think this could be an attractive entry point to a trust that should trade closer to par.

Bull
Bear
Long-term manager with an exceptional track record
Expensive charges
23 years of dividend increases, and the revenue reserves to maintain this despite potentially challenging economic conditions
Could continue to be a volatile area to invest in over the short term
Trades on a discount relative to the average peer

Continue to Portfolio
2022 Kepler Income & Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for income & growth... Find out more

Fund History

20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
15 Apr 2020 Hold fast
Investment trusts' revenue reserves could make them a vital stronghold for investors facing UK dividend cuts of as much as 47%....
04 Feb 2020 Fund Analysis
A UK focused trust which has raised its dividend every year for the past 26 years...
05 Dec 2019 Holding something in reserve
A sterling bounce poses a threat to UK dividends - we look at how UK equity income investment trust managers stand prepared…
17 Jul 2019 Ready for action
In the second part of our active management series, we assess the most active managers across the major closed-ended equity sectors…
03 Jun 2019 Knowledge is power
Schroder Income Growth's Sue Noffke discusses how she tactically employs gearing in her trust, the benefits of a fixed capital base and how she balances the demands of a board...
28 May 2019 Fund Analysis
A trust with an exceptional track record for not only outperforming the benchmark, but also for delivering dividend growth...
30 Jan 2019 The Income Portfolio
We reveal our investment trust picks for a mixture of income and capital growth...
06 Nov 2018 Everything you wanted to know about Brexit but were too afraid to ask...
Schroders' Sue Noffke answers 23 key questions and highlights some investment opportunities as negotiations move to a crucial stage...
25 Jul 2018 The Bulletproof Income Portfolio
Our Bulletproof Income Portfolio was set up to illustrate the benefits of investment trusts in providing a stable income...
20 Nov 2017 Fund Analysis
A UK income trust run via pragmatic approach that aims to blending higher-yielding shares to try and bolster income generation with lower yielding shares that should help maintain dividend and capital growth
24 May 2017 Champion funds for income investors
We unveil a sophisticated new rating system designed to pinpoint the UK's best equity income funds...
24 May 2017 Fund Analysis
22 Feb 2017 A challenge of perception
Asian Total Return Investment Company chairman David Brief says the trust's total return focus is misunderstood by many investors....
22 Feb 2017 Fund Analysis
21 Feb 2017 Digging in
The Bulletproof Income Portfolio enters 2017 with increased dividend cover at a time when a defensive income seems more precious than ever...
26 Jan 2016 Dodging bullets
The Bulletproof Income Portfolio performed well in a turbulent 2015, the perfect year to test its strengths...
05 Jun 2015 Fund Analysis
05 Jun 2015 The Bulletproof Income Portfolio
Six investment trusts with income credentials to die for.
View all

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