Fund Profile

Aberdeen Standard Equity Income 05 March 2020

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by abrdn Equity Income. 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
A new version of this profile is available. View Latest
Overview

Aberdeen Standard Equity Income Trust (ASEI) aims to provide shareholders with an above-average income and real (inflation-adjusted) growth in capital and income, through investment in a diversified portfolio of predominantly UK equities. ASEI is managed by Thomas Moore, who also manages/co-manages the open-ended Standard Life UK Equity Unconstrained Fund and the ASI Income Focus Fund. ASEI holds companies where the manager believes the market has not correctly understood (and valued) the changing operational dynamics of the underlying business.

The manager adopts an all-cap approach, holding a substantial proportion of assets in small- and mid-cap companies; ASEI’s closed-ended structure allows Thomas to hold greater exposure to less liquid smaller companies, compared with his OEIC product. Portfolio construction is unconstrained by benchmark weightings, and driven by bottom-up stock analysis.

ASEI has now raised its dividend every year for the past 19 years (each year since launch). The present yield of c. 5.1% (as of 14/02/2020) represents a sizeable premium to the wider market and a yield premium to the trust’s own history under Thomas’s tenure, and is now at around its highest level since 2009. The board has announced it intends to increase the dividend by at least 4.4% over 2020 to a minimum of 21.4 pence per share.

ASEI currently has net gearing of c. 13% in place; this is a function of the stock-specific opportunities Thomas and the team have presently identified. Long-term returns have exceeded the benchmark, but performance more recently has been challenging; however, this is not surprising given the wider market environment. This has likely contributed to the discount widening to c. 7.8% (as of 27/02/2020), which we discuss in more detail in the Discount section.

Analyst's View

ASEI offers what we view as an attractive, above-market level of yield and a strong record of dividend growth, further supported by ample revenue reserves which should support further income growth in a UK market where benchmark-level payout ratios are elevated. Recent performance has been challenging, but this is unsurprising given the unusually high level of underperformance of value factors and headwinds from the wider macro environment. Rising global growth and/or inflation expectations would likely prove beneficial to ASEI’s relative performance.

Whilst the board has historically been relatively non-interventionist with regards to the discount, this has largely been because ASEI has not generally traded at either a wide discount to NAV, or at a wider discount than the broader peer group. However, the board has intervened and utilised the buyback facility previously in 2017 and 2019, and may do so again if the discount level widens further from current levels.

The portfolio itself trades at a higher valuation discount to the benchmark than has ordinarily been the case. In our view this, the wide discount and the high yield on a portfolio and trust level indicate a potentially interesting entry point. We note that gearing has been increased in recent years. This provides a further boost to the income, with the cost of borrowing lower than the income currently available from the companies it is invested in.

bull bear
Strong track record of dividend growth backed by revenue reserves Likely negative sensitivity to macroeconomic slowdown
Well positioned to benefit on a relative basis if bond yields rise and value outperforms Gearing can exacerbate the downside (as well as amplify the upside)
Portfolio trading at a discount to the market and high dividend yield imply a possible value opportunity Charges are fairly high
Continue to Portfolio

Fund History

09 Dec 2024 Monthly roundup: updates from the property sector, our income event and digital infra news
Jo, David and Ryan discuss the latest news, reviews and interviews in the investment trust world...
01 Dec 2024 A triple threat
Three managers tell us why the time is nigh for equity income…
28 Nov 2024 abrdn Equity Income
Thomas Moore
Rewatch this event from November to hear from a range of managers that aim to provide investors with sustainable dividend income over time, alongside capital growth...
Watch Recording
17 Jul 2024 Fund Analysis
AEI offers investors an attractive yield and growing dividend…
26 Mar 2024 High yield UK stocks, with AEI Manager Thomas Moore – Podcast: Trust Issues #28
We talk managing value trap risks, opportunities in the UK, and the outlook for UK equities...
27 Dec 2023 Fund Analysis
AEI is delivering a sector-leading yield, with low valuations offering strong capital growth potential…
13 Dec 2023 In-come all ye faithful
Equity income could be a beneficiary of the higher interest environment, with trusts a good way to capture it…
11 Oct 2023 You say potato
Despite being in the same sector, investment trusts in the UK Equity Income sector could be more lowly correlated than you might think…
01 Feb 2023 Fund Analysis
AEI generates one of the highest yields in the sector without compromising growth potential…
01 Feb 2023 Go your own way
Our analysis shows that investment trusts offer better diversification for those seeking income from equities...
25 May 2022 Fund Analysis
A contrarian approach to UK equity income investing…
09 Feb 2022 The dividend dilemma
We examine the trade-off between earning a current high dividend yield and growing future dividends...
15 Dec 2021 Dividends in the time of corona
Investment trusts have proven their worth during the pandemic, delivering dividend growth despite the turmoil…
15 Sep 2021 Fund Analysis
ASEI has had a strong twelve months as the macro shifts in its favour...
19 May 2021 Results analysis: Aberdeen Standard Equity Income
ASEI’s board have indicated that it intends to raise the dividend again in the current financial year…
03 Mar 2021 Strength in depth
UK Equity Income trusts have done a heroic job of maintaining their dividends through the pandemic...
05 Nov 2020 Fund Analysis
ASEI targets above-average income and capital growth with an index-agnostic approach...
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%....
12 Mar 2020 The importance of buying earners*
Our analysis shows that the impact of dividend contributions on long term returns is anything but trivial...
05 Mar 2020 Fund Analysis
ASEI targets above-average income and capital growth with an index-agnostic approach...
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…
26 Jun 2019 Measure for measure
In the first of a two-part series, we examine the tools investors can use to assess how active a manager actually is…
14 May 2019 Fund Analysis
The long-standing manager, Thomas Moore, utilities a bottom up approach to identifying opportunities, and is entirely index agnostic in his approach...
03 Oct 2018 We can be heroes
Our analysis has uncovered the trusts which have generated a solid income through thick and thin - without compromising other aspects of performance...
01 Oct 2018 Fund Analysis
Standard Life Equity Income (SLET) offers investors above-average income, while also providing real growth in capital and income.
13 Jun 2018 Still waters run deep
UK equity income trusts trade at a discount to their global-equity-income-focused counterparts, yet our research suggests this could be unjustified...
13 Jun 2018 Fund Analysis
A highly-differentiated UK trust which, thanks to the manager’s unconstrained approach, generates the majority of its income away from the most popularly-held stocks in the sector...
13 Dec 2017 Fund Analysis
A highly-active, benchmark-agnostic portfolio of UK equities with a clear bias towards companies that generate attractive dividend growth.
06 Jun 2017 Fund Analysis
A UK focused equity income portfolio with a solid track record and unique investment style...
View all

Welcome to Kepler Trust Intelligence

Please enter a valid email address
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid email address
{{item.msg}}
Please check your email. If an account exists you'll be sent instructions on how to reset your password.
To ensure that we are able to provide content which is appropriate for you, please tell us a little about yourself.
Please choose an option
{{item.msg}}
Please enter a company name
{{item.msg}}
Please enter a location name
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a platform
{{item.msg}}
Please choose an option
{{item.msg}}
Please enter a trust
{{item.msg}}
See benefits
A free Kepler Trust Intelligence account allows you to access premium content including the ‘Kepler View’ – our verdict on the trusts we cover – and historical research so you can see how our view has changed over time. An account also unlocks useful facilities like the ‘follow’ button which lets you keep track of the trusts you’re interested in and as a logged in user you can also download PDFs of our research, and choose the layout of the page you’re reading to suit your preference. We will not share your details unless you give us permission to do so, and we won’t bombard you with emails – we only send one a week.
Please select an option
{{item.msg}}
Please enter your first name
{{item.msg}}
Please enter your last name
{{item.msg}}
Please enter a valid email address
An account already exists with this email - have you forgotten your password?
{{item.msg}}
Please enter a valid password
{{item.msg}}
Please enter a valid password
{{item.msg}}
?
The information contained herein is not for distribution and does not constitute an offer to sell or the solicitation of any offer to buy any securities in the United States to or for the benefit of any United States person (being residents of the United States or partnerships or corporations organised under the laws thereof). The investment funds referred to herein have not been registered in the United States under the Investment Company Act of 1940 and units or shares of such funds are not registered in the United States under the Securities Act of 1933.
Please confirm
{{item.msg}}
Please select an option
{{item.msg}}
How will this information be used? Your answers help us to tailor our content to relevant investment trusts, and to ensure that the asset allocation and portfolio strategy research we produce is appropriate to our userbase.
Our Website uses Cookies Cookies are small text files held on your computer. They allow us to give you the best browsing experience possible and mean we can understand how you use our site. Some cookies have already been set. You can delete and block cookies, but parts of our site won’t work without them. By using our website you accept our use of cookies. For further information please refer to the Kepler Privacy Notice.
Need help?

One more thing...

Did you know, you can 'follow' individual trusts on Kepler Trust Intelligence? Use the functions below to set up alerts and we'll send you research and updates on your chosen trusts.

Suggested trusts to follow

Browse all funds
Need help?
Current Site Kepler Trust Intelligence is produced by the investment companies team at Kepler Partners and is the UK’s premier source of detailed qualitative research on investment trusts. Absolute Hedge is a market leading UCITS research database providing proprietary research on funds, themes and strategies in the UCITS space. Kepler Liquid Strategies is a Dublin domiciled UCITS fund platform featuring a number of best-of-breed fund managers. Kepler Partners is a corporate advisory and asset raising boutique specialising in the regulated funds market in Europe and investment trusts in the UK.