Dundee-headquartered Alliance Trust hailed the results of “five years of hard work and significant change” as it uncovered a 12.5% hike in its annual dividend.
The West Marketgait-based FTSE 250 investment manager and savings provider said the return to shareholders helped by a special dividend of 1.282p per share came as it continued to cut its discount to net asset value.
Chief executive Katherine Garrett-Cox said it had been a year of “extremely good momentum” for the business, which is one of the largest investment trusts in the UK with gross assets of more than £3.2 billion, adding that she was delighted at being able to return 23% of the share price to investors.
Dividend growth for the year to the end of December had been forecast at 3%, she said, but the outturn of 10.83p was much higher than had been anticipated and maintained a 47-year record of increasing pay-outs.
Net asset value per share climbed 16.1% on last year to 516.5p at December 31, while the share price rose 19.9% to 450.1p over the period.
The trust has continued to streamline and internationalise its focus over the last 12 months, with Prudential now the lone UK firm among its top 10 equity holdings.
Even so, Ms Garrett-Cox said the Pru’s own focus on Asian markets was one of its principal attractions alongside the group’s prospects in the insurance market.
The trust’s 92-equity portfolio is focused on investment opportunities offered by drivers including demographic change and the growth of middle-class markets in emerging economies, companies trading in environmental change and best use of natural resources and innovation in bio and information technologies.
Its results statement said the global economic backdrop had improved but concerns remained for economies in Japan, China and the USA, and particularly over the unwinding of the Federal Reserve’s stimulus measures.
Ms Garrett-Cox said the trust remained “extremely focused” on stock selection, adding that equity performance compared well against peer group indexes at 21.6%.
Discount to net asset value was reduced to 12.9% during the year, the trust said, but has since been trimmed even further as it follows its core principles of investing in high-quality businesses for long-term returns. Around 0.3% of shares were bought back last year, at a total cost of £6.7m.
“The discount has come down from over 22% a few years ago and is now trading below 11%,” Ms Garrett-Cox said. “That is its lowest level in eight years.
“We always felt that the discount would narrow when the business was performing more strongly, and there was greater demand for shares.”
Total return on net asset value including reinvested dividends regarded as a key performance indicator for the sector increased by 18.4%, placing the trust in the third quartile of its peer group for 2013. It remained above the median on a three-year basis.
Alliance Trust also revealed that it expects to pay three quarterly dividends of 2.4585p during the present financial year, with a fourth interim dividend of at least 2.4585p to be announced with next year’s results.
Shares closed down 2.50p at 457.50p on Friday.