Fund Profile

Disclaimer

This is a non-independent marketing communication commissioned by abrdn. 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
SHRS’s differentiated approach to income offers a high and resilient yield, coupled with the potential for growth…
Overview

Shires Income (SHRS) is an income-focussed product led by managers Iain Pyle and Charles Luke, who strive to deliver a higher income than the market, together with the potential for income and capital growth. They invest primarily in UK equities, targeting companies they deem to be high quality because, in their view, these businesses tend to produce more resilient earnings streams with fewer tail risks. Additionally, the managers will invest overseas for opportunities that underpin their pursuit of delivering a high and growing income, as well as bolstering the resilience of the portfolio’s income streams, including Mercedes-Benz, which they invested in recently (see Portfolio). The board is seeking shareholder approval to raise the limit on overseas stocks to 20% from the current 10%, in order to allow the managers greater flexibility to achieve their objectives.

One distinguishing feature of SHRS is the managers’ decision to allocate around 20% of the portfolio to preference shares (see Dividend). With an average a yield of 7.5%, these shares do a lot of heavy lifting on the dividend, affording the managers greater flexibility to explore parts of the market less common in traditional equity income portfolios. This includes small- and mid-caps, which sometimes exhibit lower starting yields but offer greater dividend growth potential. This is an area of the market where the managers are finding increasing value, amidst attractive valuations, and have added several stocks, including Kier Group. Moreover, following the combination of SHRS with abrdn Smaller Companies Income Trust plc (aSCI) in December 2023, the managers’ direct exposure to small- and mid-caps has increased. Out of aSCI’s portfolio of 50 to 60 stocks, eight were carried over to SHRS post-combination, including 4Imprint, Hunting and Hollywood Bowl.

At the time of writing, SHRS is trading at a Discount of 9.6%, much wider than its five-year average of 4.2% and the AIC sector average of 5.9%.

Last year’s fully covered dividends give an historic yield of 6.0%, with the final dividend for the 2024 financial year of 4.8p bringing the total payout to 14.4p, an increase on the previous years’ dividend of 1.4%.

Analyst's View

We believe SHRS is positioned well to deliver on its objectives of a high and growing income, alongside capital growth. The managers seek to diversify the underlying income streams utilising a mixture of investments in high-quality UK businesses, overseas opportunities the UK market may be lacking and an allocation to preference shares (see Portfolio).

In our view, the allocation to preference shares means the managers are less constrained from an income perspective and have greater flexibility to explore beyond traditional high-income UK investments. This approach allows them to consider businesses with lower initial yields but greater potential for dividend growth, offering something different versus many in the peer group. Balancing these types of companies has helped SHRS retain a yield premium to the market, enhance its income diversification and dividend growth potential, as well as bolstered its resilience during periods of market stress.

Despite facing increased competition from the high interest rates that investors can earn on cash over the last few years, the managers’ differentiated approach to income has buoyed SHRS’s Dividend yield, which at 6.0% remains attractive versus cash. We also think that the managers’ focus on high-quality companies, overseas exposure and allocation to preference shares provides investors both growth potential and protection against inflation that are often lacking with cash. Additionally, the fact that SHRS is currently trading at an abnormally wide Discount could present a potentially appealing entry point for investors. A rebound in Performance and strengthening investor sentiment towards UK equities could see it narrow quickly, providing an additional boost to returns.

Bull

  • Successful combination with aSCI has reduced costs, increased net assets and led to more focussed exposure to small-caps
  • Offers one of the highest yields in the sector and a premium to the market, supported by a range of income streams and strong reserves
  • Discount exceeds its own five-year and peer group average, which provides an attractive entry point for new investors

Bear

  • Exposure to small- and medium-sized companies may bring more sensitivity to the UK economy
  • Funding preference share allocation through gearing may result in lower capital growth when markets rally
  • Out of favour home market and exposure to domestically sensitive stocks could weigh on the discount
Continue to Portfolio

Fund History

22 Jan 2025 A new Jerusalem
Dividend increases and share buybacks are good news for UK equities according to our analysts - who think those dark Satanic mills could deliver world-beating total returns...
20 Dec 2024 The little trust that could
A plucky performance saw this small cap trust end the year ahead of a strong pack in our annual top picks challenge...
30 Oct 2024 Cream of the crop
We identify those trusts that use the distinctive features of investment trusts to the full…
21 Oct 2024 Monthly roundup: news on CHRY and ATST, highlights of our latest webinar series and the most popular investments in September
Jo and Ryan discuss the latest news, reviews and interviews in the investment trust world...
13 Oct 2024 Global equities in a year of change
Watch and download the presentations from this week's event...
09 Oct 2024 Shires Income
Iain Pyle
Rewatch this webinar as part of our October online series 'Global equities in a year of change' hosted by the team at Kepler Trust Intelligence...
Watch Recording
28 Aug 2024 Dream team
Our analysts review how their fund picks for 2024 have done…
17 Jun 2024 Fund Analysis
SHRS’s differentiated approach to income offers a high and resilient yield, coupled with the potential for growth…
27 Feb 2024 Mergers, preference shares, and small caps – Podcast: Trust Issues #25
We speak to Shires Income's Iain Pyle about goings on at the trust and his outlook for the year...
03 Jan 2024 Probably better asking an octopus
Our investment trust experts uncurl a tentacle each and choose their ‘top picks’ for 2024…
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…
04 Oct 2023 Fund Analysis
The upcoming proposed combination with ASCI could offer SHRS benefits of scale…
15 Feb 2023 Fund Analysis
SHRS’s differentiated approach to income has led to a high yield and the potential for growth…
01 Feb 2023 Go your own way
Our analysis shows that investment trusts offer better diversification for those seeking income from equities...
07 Sep 2022 Fund Analysis
SHRS has managed to maintain a resolutely high income yield without compromising total returns…
23 Feb 2022 Fund Analysis
Combining balanced approaches to asset allocation and stock picking to provide an attractive and robust source of UK income…
04 Mar 2021 Slides and Audio: Shires Income / Murray Income
Download the presentation and listen to the audio from our 'Ideas for your ISA' Spring Conference on 04 March...
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.