Martin Currie trust picks larger dividends over share buyback

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The Martin Currie Asia Unconstrained investment trust board has chosen to increase its yield rather than launch a share buyback over concerns about the share discount to net asset value.

The current discount for the ₤154.4m investment company, which has a historical yield of 2.2 per cent, is 14.7 per cent.

Pending shareholder approval the investment trust will increase its yield to approximately 4.5 per cent for the year ended 31 March by introducing a distribution from capital to the dividend.

It achieved capital return on net assets of 30.8 per cent for the year.

The first first payment from capital will be made as part of the final dividend paid in August 2017 for the latest tax year.

The intention is to repeat the policy in subsequent years.

Chairman Harry Wells says the change will be particularly appealing to retail investors and argues dividend tax changes that will be implemented by HMRC in 2018 will only impact a small number of shareholders as most hold the investment trust through tax-free Isas or Sipps.

Well says: “For some time, the Board has been concerned by our shares trading at a wide discount to Net Asset Value ignoring the recent improvement in investment performance.

“The Board submits that buying back shares is not the solution as this just facilitates sellers rather than rewarding loyal shareholders.”

The changes will not impact the investment trust’s investment strategy.