Manchester & London (MNL ) will use the unused money from its discontinued share buyback programme to increase its dividend to 5% – a sizable increase from the current yield of 3.4%.

The £312m technology trust halted buybacks last month after the proportion of shares owned by manager Mark Sheppard almost exceeded the maximum threshold for MNL to remain listed as an investment company. M&M Investment Company, which Sheppard owns, now has a 62.3% stake in the trust, but 35% needs to be in public hands for it to keep its status.

The board said today that it has listened to concerns that the discontinued buybacks will reduce total capital returns to shareholders, so the trust has decided to increase its dividend to at least 40p per share per annum, compared to 28p currently.

This presents a marked diversifier versus its peers in the Association of Investment Companies’ (AIC) Technology & Technology Innovation sector, who do not pay any dividends. Despite investing in the same equity pool, Polar Capital Technology (PCT ), Allianz Technology (ALW ), Sure Ventures (SURE ), and Superseed Capital (WWW ) have no dividend to speak of.

The strengthened dividend also sets MNL apart from its former peers in the AIC’s Global sector, which it transferred from earlier this year. Its new yield is beaten only by Lindsell Train’s (LTI ) 5.7% offering, but MNL’s share price total return of 149.7% over the past three years greatly outperforms the 12% loss reported by LTI.

This strong performance was driven by the majority (64.5%) of MNL’s portfolio being held in just two market-leading stocks: Nvidia and Microsoft. They have climbed around 1360% and 115%, respectively, over the past three years. Although, the unusually concentrated positioning does leave MNL highly exposed to any reversal for these businesses. 

Chair Dan Wright confirmed that the heightened dividend will be in place for at least five years, even if MNL’s share ownership dilemma is resolved.

The trust is reported to be assessing ways to continued its buybacks, with a source close to the situation telling Investment Trust Insider that MNL is in ‘tentative discussions’ to merge with several trusts targeted by Saba Capital.

Any merger would potentially be mutually beneficial for both parties, allowing Sheppard to water down his majority stake whilst still keeping a large enough position that it would dilute Saba’s influence in any combined vehicle.

The curtailment of buybacks has seen MNL’s share price discount to portfolio net asset value widen out recently to 25.9%, versus a 17.3% 12-month average, according to Winterflood data.