Scottish American Investment Company (SAINTS) is a differentiated equity income trust, aiming to deliver real dividend growth by increasing capital and growing income. Distinctively, the trust invests globally in equities, but it also has the flexibility to invest in other areas such as bonds and directly held commercial property.
2015 saw a shift in strategy– moving from a strategy that targeted solely high income – to a portfolio targeting income growth. So far, this has had a transformative effect on total returns relative to peers and the benchmark, and at the time of writing SAINTS is the best performer in the Global Equity Income investment trust sector over one, three and five years. Since the change in strategy, the trust has delivered NAV total returns of 63.8%, ahead of the average trust in the Morningstar IT Global Equity Income sector (42.9%), the IA Global Equity Income sector (35%), not to mention the benchmark – the FTSE All World index (50.3%) over the same period.
SAINTS has grown its dividend every year for the last 38 years and done so at a rate equivalent to 2.9% per annum over the last five. Having paid an uncovered dividend in 2015 and 2016, 2017 was marked by a covered dividend having been paid. Currently only three of the four dividends have been declared for FY18, but the trust is currently yielding 3.2%.
The trust is structurally geared via a somewhat expensive fixed-rate debenture that expires in 2022. Relative to the majority of its peers - which on average have gearing of around 11% - the gearing level of around 17% is fairly aggressive. Much of the gearing has been invested in property and fixed interest, which helps to offset some of the extra volatility that this level of gearing might otherwise be expected to engender.
SAINTS has consistently traded on a premium over the past few years, trading in a range between a premium of about 6% and a discount of around the same level. However, over the past year or so, the trust’s premium rating has been relatively consistent. The current premium of c.3.8% compares to the average of the last year of 3.9% and is marginally higher than the current sector average (-2.4%).