The Securities Trust of Scotland plans to distribute more of its profit as dividends in order to bring the dividend yield in line with its AIC peer group.
The trust pays quarterly dividends, with an additional fourth interim dividend (or final dividend). For the year ending March 2015 the total dividend was 4.9p or 3.4 per cent of the current share price. For the current year, the board has announced a minimum dividend of 5.8p or a 4.1 per cent yield on the current share price.
In addition, the board says it will aim to increase the dividend annually alongside capital growth.
“One of the plus points of investment trusts is that you can pay dividends out of both income and capital, and shareholders want attractive dividends right now,” says Alan Porter, manager of the £183m Securities Trust.
“Previously the trust was paying a yield of 3.4 per cent, which was at the lower end of the Global Growth and Income sector,” Porter says. “Going forward the yield will be 4.1 per cent, which is around the average of the trust’s peers. We are bringing it in line with the peer group and taking more of a total return approach.”
He adds: “We are offering shareholders a more attractive dividend and we are happy to pay it out of capital if required… We are using capital we have built up in a strong market. We have had a six-year bull run so we have quite a lot of capital.”