Murray Income 08 December 2021
Disclosure – Independent Investment Research
This is independent research issued by Kepler Partners LLP. The analyst who has prepared this research is not aware of Kepler Partners LLP having a relationship with the company covered in this research report and/or a conflict of interest which is likely to impair the objectivity of the research and this report should accordingly be viewed as independent.
Murray Income Trust (LON:MUT), managed by Charles Luke and Iain Pyle at abrdn, looks to invest across a broad range of companies to achieve a high and growing income combined with capital growth.
The trust is conservatively managed, so Charles and Iain aim to have a sensibly diversified portfolio. They ensure that the portfolio is not overly exposed to one economic scenario and therefore like to invest in a broad range of companies. Capital and income exposure to any one company is capped at around 5% of the portfolio. Additionally, Charles and Iain look for strong ESG characteristics which the experienced team at abrdn provide support in identifying.
At a current 6.8% discount, the share price rating has widened from a short lived 2.5% premium one year ago. The trust has delivered 48 consecutive years of dividend growth, notably maintaining the dividend during the COVID-pandemic. At the time of writing the dividend yield is 3.9% (02/12/2021).
Primarily, holdings are listed on the UK market, but the trust can invest up to 20% of the portfolio overseas. This allows for diversification of risk and allows access to companies and themes outside the UK market. Charles and Iain believe this allows them to maintain the quality of the portfolio despite its income mandate, as we discuss in the Portfolio section.
In November 2020, the trust merged with Perpetual Income and Growth Investment Trust (PLI) which has led to gross assets rising to over £1bn. Charles tells us that absorbing the extra assets was seamless and post the merger, MUT is cheaper in terms of OCF and bid/offer spread, to the benefit of shareholders.
For income-seekers, MUT offers a dependable and stable source of income generation. MUT’s ‘Dependable, Diversified and Differentiated’ investment approach has yielded strong and consistent income production. Not only has MUT consistently increased income production for the last 48 years, but crucially it has been able to maintain this strong income generation during the market turmoil of 2020. Key to this stability has been the focus on quality companies, in addition to the diversification which arises from having up to 20% of the portfolio invested outside of the UK.
ESG considerations are incorporated into the investment process behind MUT, and the team make use of the experienced ESG team at abrdn who often aid with stewardship and engagement matters. This has likely helped to contribute to the trust’s AAA MSCI ESG rating. With a patient buy and hold approach, Charles and Iain do not trade opportunistically, but instead take a long-term view and allow the fundamental factors – including ESG factors – behind each investment to drive returns.
MUT is attractive given the exposure it gives to a diversified portfolio of high-quality companies, in addition to robust mid-sized companies which have greatly benefitted from the latest economic recovery. We think MUT could be appealing for ESG conscious investors seeking resilient levels of income generation especially during market stress, which is an atypical feature of many income generating investment trusts in addition to a focus on quality investing.
|Murray Income Trust has delivered 48 consecutive years of dividend growth
|Low exposure to the financial and energy sectors may mean trust struggles in a ‘value’ rally
|Focus on quality companies has maintained income generation and good risk adjusted returns during market turmoil
|Increase in gearing on the back of the merger could present risks if the market suffers a correction
|Current discount of nearly 8% may offer an attractive point of entry
|No inflation related target for dividend growth