Securities Trust of Scotland

Last updated 25 September 2019

Led by Mark Whitehead, STS offers an attractively valued portfolio of global equities...

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Securities Trust of Scotland. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Securities Trust of Scotland

Securities Trust of Scotland (STS) is a broadly diversified global equity income portfolio that aims to deliver a rising level of income and long-term capital growth from a diversified portfolio of equities.

At the helm of the portfolio is Mark Whitehead – who joined the group as head of income in 2015, spearheading a resurgence on income for the trust. Mark employs an unconstrained, bottom-up approach to stock selection and has introduced a number of measures to boost the trust’s capacity to generate income, including the disciplined use of derivatives and the increased use of gearing. Additionally, the trust has the capacity to pay income from capital, helping smooth dividends regardless of the economic conditions.

Starting with an investable universe of around 3,000 stocks, meticulous analysis narrows the universe down to just 500 names. Particularly prevalent within the process is credit analysis and stress testing, where the manager examines a company’s free cashflow through different scenarios and in turn, their capacity for sustainable dividend growth. This is a particularly unique and important tool in the current volatile conditions where in the UK particularly, we have seen many of the highest yielders cut their dividends.

Since Mark’s appointment in May 2016, the trust has performed strongly relative to the peer group benchmark, outperforming both the IA and AIC Global Equity Income total NAV returns of 47.4% and 53.8% respectively over the same period. Alongside capital appreciation the trust has a progressive dividend policy, aiming to offer investors inflation-beating dividend growth. Currently the trust offers a solid yield of 3.2%.

The trust is trading on a discount of 4.3%, the second widest in the sector. This is despite the fact the trust has been the strongest performer in the seven-strong sector over the past year, and in the top three for the past five years.

William Sobczak
William joined Kepler Partners in February 2018 as an investment trust analyst. Prior to joining, William graduated from the University of Western Australia, with a BSc in Psychology.

Fund History

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Key facts

Investment objective

The team at STS aim to offer investors rising income and long-term capital growth through investment in a balanced portfolio of global equities.

As at:

18/09/19

Group/Investment

Securities Trust of Scotland

Ticker

STS

Management Company

Martin Currie Investment Management Ltd

Manager Name

Mark Whitehead

Association of Investment Companies (AIC) Sector

Global Equity Income

12 Mo Yield

3.2%

Dividend Distribution Frequency

Quarterly

Latest Market Capitalisation

£205,442,677

Latest Net Gearing (Cum Fair)

8%

Latest Ongoing Charge Ex Perf Fee

0.9%

Turnover Ratio

41.1%

Shares Outstanding

104,285,623

(Discount) / Premium (Cum Fair)

-4.3%

Daily Closing Price 

197p

Source: Morningstar

Disclaimer

This report has been issued by Kepler Partners LLP.  The analyst who has prepared this report is aware that Kepler Partners LLP has a relationship with the company covered in this report and/or a conflict of interest which may impair the objectivity of the research.

Past performance is not a reliable indicator of future results. The value of investments can fall as well as rise and you may get back less than you invested when you decide to sell your investments. It is strongly recommended that if you are a private investor independent financial advice should be taken before making any investment or financial decision.

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