Fund Profile

Disclaimer

This is not substantive investment research or a research recommendation, as it does not constitute substantive research or analysis. This material should be considered as general market commentary.

Overview
With a strong track record for capital appreciation and income, the past five years haven’t seen any better opportunities to enter SAINTS…
Overview

Scottish American Investment Company (SAINTS) aims to offer investors real dividend growth through increasing income and capital over the long term. The portfolio is predominantly comprised of equities, but the manager also has the capacity to invest in bonds, property and other asset classes.

James Dow and Toby Ross manage the portfolio, searching for companies with a dependable yield and good growth prospects. They believe that companies which are committed to paying out dividends are generally managed better and utilise their capital more appropriately.

Since the shift in strategy in 2015, when the managers moved from focussing purely on income to dividend growth, the trust has consistently outperformed the benchmark and its peer group. As can be seen in the Performance section, over the five years to 18 March 2020 the trust has generated NAV total returns of 60.7%, in comparison to 24.9% from the AIC Global Equity Income sector and 41.4% from the FTSE All-World. In fact, the trust has only underperformed the benchmark in one of the past five calendar years, and this was by just 0.2% in 2016.

As we discuss in the Dividend section, SAINTS’s record for dividend growth is as impressive as its history for capital appreciation. The trust has grown its dividend every year for the last 40 years, and has done so at a rate equivalent to 2.5% per annum over the last five. Currently the trust is yielding 3.8%, the lowest in the sector; however, this is perhaps inevitable given the trust also focusses on capital appreciation.

SAINTS has consistently traded on a premium over the past three years, trading in a range between a premium of about 6% and a discount of around the same level. However, at the time of writing the recent uncertainty has seen the trust slip to a discount of more than 7%.

Analyst's View

SAINTS has long been a standout trust in the AIC Global Equity Income sector and recent events have only further illustrated why. The trust has outperformed peers and the benchmark over the past five years, during what has been a strong bull market across the globe. However, despite being relatively highly geared, the manager has also been able to protect capital (in relative terms) during a period of great uncertainty in 2020. This is illustrated by the trust losing just 14.6% of NAV total returns over the year thus far, relative to a sector-wide average loss of more than 20%. This is largely due to the diversified approach the manager takes, and the capacity for its managers to split the portfolio across a number of asset classes. Alongside the strong capital appreciation, SAINTS has continued its 40-year track record of growing its dividend. This dividend is 1x covered by revenue reserves which will be particularly important in 2020, when we imagine a number of underlying companies will be under pressure to cut their dividends.

Despite the strong track record, recent events have caused the trust to slip (at the time of writing) to a discount not seen for five years (7.3%). We see this as an extremely attractive entry point into a trust that has proven itself time and time again, with an attractive income prospect which should be able to continue, regardless of the wider macroeconomic market.

bull bear
Strong performance relative to peers OCF at the costlier end of the sector
Impressive track record for dividend growth fully covered dividend Huge amount of uncertainty surrounds global markets
Trading at a rare discount Relatively high gearing adds to risks
Continue to Portfolio
2022 Kepler Growth Rated Fund

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

Fund History

18 May 2022 Riding out the storm
We look at trusts with tightly governed discounts which may appeal to investors in volatile markets…
14 Apr 2022 Scottish American Investment Company – A year in review and looking ahead
In this update, co-manager James Dow gives an update on the trust, portfolio activity and outlook, including an insight into SAINTS evolving approach to ESG...
05 Jan 2022 Kepler’s top-rated trusts for 2022
We unveil the winners of our ratings for 2022 in the Growth, Income & Growth and Alternative Income categories…
06 Aug 2020 Recipe for disaster?
In this article, we assess whether the recent shift to concentrated portfolios has been beneficial or detrimental during corrections…
05 Jun 2020 Deep impact
Audio and presentations from our conference this week, where fifteen of the world's best fund managers described a profoundly altered investment landscape...
13 May 2020 Braving the new world
Join 15 of the UK's best known fund managers at the Kepler Trust Intelligence Virtual Summit to find out how they see the world after the pandemic...
27 Mar 2020 Fund Analysis
With a strong track record for capital appreciation and income, the past five years haven’t seen any better opportunities to enter SAINTS…
05 Dec 2019 Seeking an income that stays on track for years to come
30 Mar 2019 The resilient ones
Fund manager Toby Ross tells Colin Donald about the search for companies built for bad times as well as good...
06 Feb 2019 Income for the long haul
With 'ISA season' looming we identify investment trusts which offer long-term, dependable income streams for yield-hungry investors...
01 Feb 2019 Fund Analysis
The trust's shift to an 'income growth' focus continues to pay dividends and performance versus peers has been strong...
15 Aug 2018 The income edge
Last year saw investment trusts soar in popularity among both retail investors and wealth managers. We examine why this has happened, as well as the structural advantages of investment trusts for income-hungry investors...
27 Jun 2018 A winning combination
New research from Cass Business school helps explain why closed-ended funds have outperformed their open-ended peers in the major equity sectors since 2000...
13 Apr 2018 Fund Analysis
A shift in focus from income to income growth has proved beneficial for this diversified global trust...
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