Murray Income hits 50 years of rising dividends

UK equity income fund Murray Income becomes the ninth investment trust to achieve the landmark of consistently increasing dividends for half a century.

Murray Income (MUT ) has delivered 50 years of rising dividends, becoming the ninth investment trust to hit this landmark.

The £1bn UK equity income portfolio, managed by Charles Luke at Abrdn, today declared a fourth interim dividend of 12.75p per share, bringing the total for the year to 30 June to 37.5p, a 4.2% increase on the previous year.

The latest dividend will be paid to shareholders on 14 September and comes in a year when the 4.2%-yielding closed-end fund celebrates its centenary since launch in 1923.

Murray follows sector rival JPMorgan Claverhouse (JCH ) in achieving half a century of unbroken dividend increases and beats by several months Baillie Gifford’s global equity income flagship, Scottish American (SAIN ), which has paid rising payouts for 49 years.

Janus Henderson’s City of London (CTY ) holds the record for dividend longevity, having consistently lifted its income distributions for 56 years.

Investment trusts and companies can achieve these impressive records because of the presence of revenues reserves which they can accumulate in good years and dip into when dividends from portfolio companes are scarce.

By contrast, open-ended investment companies and unit trusts cannot build up reserves as they are obliged to pay out income as they earn it, leading to greater variability in their payouts. 

UK’s double appeal

In a statement, Luke praised the UK stock market, in which Murray Income is at least 80% invested, saying it had a long-established and well-developed culture of paying dividends to investors. As a result the FTSE All-Share index yielded 4% against just 1.5% from the S&P 500 in the US, he said, although its total returns had been far stronger than the UK index for many years. 

Luke said the fact the UK market was less highly valued than the US make it ‘doubly appealing’, enabling him to buy high quality, largely global businesses at good prices that were increasingly being snapped up by predators.

‘The UK market is often seen as old-fashioned, beholden to yesterday’s companies in mature, low-growth industries. This may be true of a good number of the UK’s largest companies but, taking a look lower down the market capitalisation scale, there is an increasing range of companies exposed to unstoppable global trends such as digitalisation, ageing populations, the energy transition and emerging global wealth,’ he added.

Given that 20% of Murray can be invested in overseas, Luke said there was no danger of missing out on good growth stocks.

‘In more difficult times it is those companies which can demonstrate pricing power and resilience, benefit from their robust balance sheets and are led by experienced management teams, that are able to emerge stronger - ultimately this will be recognised in their valuations,’ Luke (pictured) said.

Alongside top positions in analytics company Relx (REL), drugs developer AstraZeneca (AZN) and consumer goods giant Unilever (ULVR), Luke also holds biomass power generator Drax (DRX), scientific technology product provider Oxford Instruments (OXIG) and biotech company Genus (GNS).

Holdings outside the UK include French oil giant TotalEnergies, Australian mining group BHP and Danish pharma company Novo Nordisk.

This year Murray Income has risen a modest 3.8%, behind the 6.3% underlying growth in its net asset value to leave the trust at a 7.5% share price discount, according to Numis data. The FTSE All-Share index benchmark has gained 4.9%.

Luke, who has managed the trust since 2004, has had a turbulent few years, but five-year shareholder returns of 34% are almost double the benchmark’s 18.8%, while over a decade, investors saw returns of 65.5%, underperforming the benchmark by 3%.

Murray Income is the biggest of four UK equity income trusts run by Abrdn, which looks anomalous in a year that has seen a string of mergers by other trusts in the group. There has been speculation that two or more may merge to forge a larger and more attractive fund, following the example of Murray Income which bulked up through a combination with rival Perpetual Income & Growth three years years ago.

Murray Income above and below the index over 10 years 

Source: Morningstar

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