Law Debenture (LWDB)

Law Debenture (LWDB) offers a highly differentiated equity income proposition in the investment trust sector, combining a predominantly UK-focussed equity portfolio managed by James Henderson and Laura Foll with its Independent Professional Services (IPS) business. The IPS business funds over a third of the trust’s total dividends through its steady and recurring revenues which affords the managers greater flexibility in their investment remit. As a result, the Portfolio often looks very different compared to more traditional equity income strategies. Over the latest six-month period to June 2024, each IPS segment reported revenue growth, compared to the same period last year, with corporate services leading the way posting an 11.8% growth, compared to 1.9% last year.

Performance has been equally robust. Over the 12 months to 10/12/2024, the trust delivered NAV total returns of 17.6%, outperforming its benchmark’s return of 14.1%. Key contributors included NatWest and Barclays, which benefitted from persistently high interest rates boosting their interest margins which, alongside strong results, led to sharp upticks in both companies' share prices. Rolls-Royce also contributed having experienced a significant earnings uplift from cost savings and the recovery in flying hours. Given recent market volatility, the managers have taken the opportunity to trim some portfolio positions where valuations have risen significantly, leaving, in their view, limited further upside, including Rolls-Royce, Marks & Spencer, and BAE Systems.

At the time of writing, LWDB trades at a 1.7% premium, slightly narrower than its five-year average and the UK equity income sector (see Discount). Whilst its historical yield of 3.6% remains below the sector average of 4.2% and the FTSE All-Share Index yield of 3.7%, the trust maintains a 44-year track record of either maintaining or increasing Dividends.