Schroder Income Growth (SCF) aims to provide real growth of income, in excess of inflation, while growing capital for investors. The long-serving lead manager, Sue Noffke, invests primarily in above-average yielding UK equities, but also has the capability to invest up to 20% of the portfolio outside the UK.
Over the past five years the trust has been an impressive performer, outperforming the benchmark (FTSE All Share), the AIC UK Equity Income peer group and the open-ended peer group. Despite a tough 2018, the trust has recovered well in 2019 and has delivered close to 12.6% (to the 22nd of May), outperforming the benchmark and the peer group by c.1% respectively. Alongside strong capital growth, the trust has delivered outstanding long-term dividend growth. The trust is an AIC Dividend Hero, having increased dividends for each of the past 23 years. Currently, the trust yields 4.1%.
Fundamental research sits at the heart of the process and the experienced team look to take advantage of market inefficiencies, identifying out of favour companies that will outperform over the long term. Typically a holding will be within the portfolio for 5-7 years, however, the manager has no issue cutting her losses should the investment proposition change. Currently, the manager believes there are a vast amount of opportunities within the UK, as relative valuations remain low in a historical context and comparable companies that are domiciled elsewhere trade at considerably greater valuations. As such, only 2.7% of the portfolio is domiciled outside the UK. The largest overweights within the portfolio are towards media, financial services and personal goods, and underweights are towards beverages and banks.
Over the past few years the discount has narrowed somewhat, and it now trades at 4.1%. This is in line with the sector average but is 2.5% narrower than the trust's 12-month historical average (to the 22nd of May) of 6.6%.