Aberdeen Standard Equity Income Trust (ASEI) aims to provide shareholders with an above-average income and real (inflation-adjusted) growth in capital and income, through investment in a diversified portfolio of predominantly UK equities. ASEI is managed by Thomas Moore, who also manages/co-manages the open-ended Standard Life UK Equity Unconstrained Fund and the ASI Income Focus Fund. ASEI holds companies where the manager believes the market has not correctly understood (and valued) the changing operational dynamics of the underlying business.
The manager adopts an all-cap approach, holding a substantial proportion of assets in small- and mid-cap companies; ASEI’s closed-ended structure allows Thomas to hold greater exposure to less liquid smaller companies, compared with his OEIC product. Portfolio construction is unconstrained by benchmark weightings, and driven by bottom-up stock analysis.
ASEI has now raised its dividend every year for the past 19 years (each year since launch). The present yield of c. 5.1% (as of 14/02/2020) represents a sizeable premium to the wider market and a yield premium to the trust’s own history under Thomas’s tenure, and is now at around its highest level since 2009. The board has announced it intends to increase the dividend by at least 4.4% over 2020 to a minimum of 21.4 pence per share.
ASEI currently has net gearing of c. 13% in place; this is a function of the stock-specific opportunities Thomas and the team have presently identified. Long-term returns have exceeded the benchmark, but performance more recently has been challenging; however, this is not surprising given the wider market environment. This has likely contributed to the discount widening to c. 7.8% (as of 27/02/2020), which we discuss in more detail in the Discount section.