Dividend delights fuel Murray International’s return to form
Murray International (MYI ) has bounced back to outperformance thanks to robust dividends, including a near 300% rise in the payout from one Mexican stock.
Over the half-year to 30 June, the £1.8bn portfolio of global income stocks, which has a bias to value stocks, saw its income rise by £6m, or 13%, to £52m compared with the same period last year.
Of the 25 companies declaring full-year dividend intentions, 22 increased payouts, with TSMC, Telkom Indonesia and Siemens lifting dividends by 27%, 19% and 11%, respectively.
These, however, were eclipsed by Mexican airport operator Grupo ASUR, which declared a dividend up 281% year-on-year. Of the 80 pesos the company will pay this year, two special dividends totalling 30 pesos are due in the second half, meaning the ‘scale of dividend will not be repeatable in future years’, according to managers Martin Connaghan and Samantha Fitzpatrick.
‘Whilst growth in passenger numbers has been more subdued in its Mexican operations recently, assets in Puerto Rico and Colombia have offset that to some degree,’ the managers said.
‘The business has consistently grown commercial revenues – the spending by passengers in its terminals – at very attractive rates over the long term, resulting in a high-margin, cash-generative business.’
The trust declared two dividend distributions of 2.6p per share in the period and said it remains committed to a progressive dividend policy, with last year’s 20 years of consecutive dividend increases having firmly cemented its place in the Association of Investment Companies’ ‘dividend hero’ list.
Connaghan and Fitzpatrick who took charge of the portfolio following the retirement of long-serving manager Bruce Stout last year, said: ‘We’re ahead of where we were last year.
‘A lot of what’s still to come in the second half will be from quarterly payers, many in the US, and we have good visibility on how those will shake out. The income picture is looking very robust, which is pleasing alongside the capital performance delivered in the first half.’
Diversification pays off
Over the six months, MYI delivered a net asset value (NAV) total return of 6% and a share price total return of 11.6%, compared with a 1% rise in the FTSE All-World benchmark. Since then, NAV total returns are 5.7% versus 5.2% for the index and 3.3% for the MSCI All Country World High Dividend Yield index, which the trust announced as its new benchmark going forward, and said is ‘more reflective of the company’s investment style’.
Diversification played a key part in the outperformance, with top contributors including tobacco giant Philip Morris International, the standout income payer Grupo ASUR, Hong Kong Exchanges and Clearing, and European-based utility Enel.
The biggest detractors were Merck, Bristol Myers Squibb, Diageo (DGE), Pernod Ricard, and GlobalWafers.
New positions were initiated in Rio Tinto (RIO), Infosys, and Intesa Sanpaolo, while healthcare holdings were also boosted despite the ongoing uncertainty around US pharmaceutical tariffs.
The managers flagged upcoming patent expiries as another source of caution: ‘This is nothing new, but as the dates approach, it gives investors another reason to be nervous.
‘Some of these stocks, like Merck and Bristol Myers, are trading at just eight or nine times this year’s earnings, while delivering around a 5% dividend yield. We see that as much of the bad news already priced in, which gives us comfort to add selectively.’
The trust also continued to make reductions to fixed income, selling Indonesian and Dominican Republic government bonds and recycling the capital into Mercedes-Benz Group and Intesa Sanpaolo, both of which ‘presented opportunities for higher yields’.
‘Over the last several years, fixed income was used opportunistically. But since Covid, the focus has been on moving capital back into equities,’ explained Connaghan.
Fitzpatrick added: ‘There could be times when equity yields look tight and we see opportunities in fixed income, but these would need to be extreme – that’s when we’ve stepped in before.’
Looking ahead, the pair expects market conditions ‘may continue to shift rapidly, and the balance between opportunity and risk is likely to remain delicate’. Nonetheless, they said ‘it is pleasing to see the portfolio exhibit robustness during the bouts of volatility we have experienced this year’.
Deutsche Numis analyst Gavin Trodd recognised the MYI team has ‘delivered strong NAV performance since taking over, following an extended period of poor performance – with the notable exception of 2022, when its defensive approach outperformed in a rising interest rate environment’.
‘We believe that MYI offers an interesting, differentiated yield play,’ he said, adding the portfolio is significantly underweight the US, with 7.4% in Latin America, providing minimal overlap with global equity benchmarks and peers.
‘There are limited investment companies with a “value” bias, and we believe that it offers something different compared to global equity benchmarks and peers, illustrated by a high active share and limited portfolio overlap,’ he said.
MYI’s shares currently yield 4.1% and trade on an about 5% discount, narrowing from double digits at the end of last year.
