Scottish American (SAIN)

Scottish American (SAIN) is designed to be a core holding for investors seeking income. Its management team, led by James Dow, invests globally in pursuit of dividend growth. Income growth is prioritised over high yield, and James looks for companies which can deliver real growth in cash flow and earnings over the long term, meaning they should be able to deliver real growth in dividends.

The core of the proposition is a portfolio of equities with a bias to high-quality compounders, so exposure to growth companies and technology companies is higher than the typical equity income portfolio. Companies will be bought with a low current yield if James thinks they will be able to deliver attractive, above-inflation dividend growth. This portfolio is supplemented with a higher-yielding property portfolio, currently worth c. 9% of the total portfolio, and smaller positions in bonds and infrastructure equities, which also help boost the yield. At the time of writing, the yield is 2.8% versus an AIC Global Equity Income sector average of 3.6%, but SAIN (usually referred to as SAINTS) has delivered 50 consecutive years of Dividend growth, making it one of the AIC’s Dividend Heroes.

The trust has delivered attractive total returns to investors over the long run, with a low beta to equity markets and lower than benchmark volatility. As we discuss in the Performance section, from 2015 to 2021, the trust outperformed the sector and the FTSE All World Index benchmark each year. The trust also outperformed the index in the down year of 2022, although while it delivered positive returns in 2023 it was behind the benchmark. Having less than the index in the ‘Magnificent Seven’ held the trust back a bit, while the non-equity holdings underperformed equities.

Like most investment trusts, SAINTS’ Discount trended wider over 2023, and at the time of writing it is well below its five-year average, at 9% versus 0.5%.