Flash update: JPMorgan Global Growth & Income

• JPMorgan Global Growth & Income (JGGI) has announced a significant increase in the dividend to be paid in the 2025 financial year, after strong performance in the 12 months ending 30/06/2024.
• The board has announced it intends to pay four dividends of 5.7p per share for the next year, for a total of 22.8p per share. This is 23.6% higher than the dividend paid for 2024.
• The trust’s dividend policy is to pay 4% of the previous year’s closing NAV, using capital reserves if necessary.  As such, the increase reflects strong growth in the NAV over the 2024 financial year.
• JGGI delivered a 23.5% NAV return over FY 2024, not including the reinvestment of dividends, with these gains essentially coming since the end of November as markets rallied.
• This is the ninth successive year in which the trust has raised its dividend, and since the current dividend policy was adopted in 2016 the compound growth has been 24% per annum or 613% cumulatively.
• The first quarterly dividend of 5.7p is expected to be paid on 07/10/2024 to shareholders on the register as of 30/08/2024. The three other dividends are expected to be paid in January, April and July 2025.
• Chairman of the board Tristan Hillgarth said: “This growth is a function of the outstanding returns that our portfolio managers have generated over this period, assisted by the fact that they are unconstrained by the requirement to achieve a certain level of income. This allows them to select the 'best' stocks, rather than those that fit a specific income profile. Our capacity to part-fund dividends from our significant level of realised capital profits provides JGGI with the means to meet our shareholders' desire for income, combined with clarity over dividend payments for the coming year."

Kepler View

JPMorgan Global Growth & Income (JGGI) has delivered strong dividend growth as well as highly attractive capital returns in recent years thanks to the simple, yet effective strategy of asking the managers to invest in high quality growth stocks without reference to their yield, while paying a dividend from capital where necessary. Investors have therefore arguably got the best of both worlds: index-beating total returns as well as a healthy dividend yield. Those who don’t want to draw an income from the strategy can simply reinvest the dividends back into the shares.

The chart below shows the progression of the dividend per share since the new policy was adopted. The dividend per share “resets” to 4% of NAV each year, meaning the dividend yield on the shares is typically close to this, the exact number depending on the premium or discount. However, it is worth considering how the strong growth in the NAV means an investment can deliver a very high yield over time. An investment made in the shares five years ago, on 30/06/2019, would now be yielding 6.8%. This is thanks to the growth in the NAV that has come about from investing in companies that have the best growth prospects. The largest holdings in the current portfolio are Microsoft, Amazon, Nvidia and Apple, none of which have a significant yield but all of which have delivered market-beating returns over five years.

JGGI’s shares remain in demand, with the trust trading on a small premium as of the time of writing. The board continues to issue shares into the market to meet this demand, even after corporate activity has seen three trusts merge into JGGI and the market cap swell to £2.8bn as of 01/07/2024. This size should bring liquidity in the shares, and also falling charges. The trust’s success comes against the backdrop of a difficult period for the investment trust sector as a whole, with discounts generally wide in historical terms. We think this speaks to the strong attractions of the strategy which offers access to some of the world’s most exciting growth companies as well as a high and fast-growing income.

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