Temple Bar bags income and NAV gains as UK firms refocus on divis

Temple Bar lifts dividend in a strong six months for both income growth and capital gains as UK companies revisit dividends following a long period of buybacks.

Temple Bar (TMPL ) investors are enjoying outsized returns and increased income as UK companies refocus on dividends after a long season of buybacks.

Over the six months to 30 June, the £1bn UK equity income trust posted an increased second interim payout of 3.75p per share, meaning the total dividend is up 35% – or 5p – on last year.

The dividend rise is the result of UK companies returning more cash to investors via dividends after taking advantage of falling valuations and buying back their own stock as the UK remained firmly out of favour. 

In March, managers Ian Lance and Nick Purves – who are both Citywire AAA-rated – raised concerns about low levels of income received from the trust’s underlying portfolio, as more than half of its holdings by assets devoted extra cash to buying back shares in 2024. 

To address this shift, the team announced it would be drawing on capital reserves to enhance its payouts – putting aside an additional 0.75p per quarter. 

TMPL shares currently trade very close to NAV, making reserving cash for its own buybacks less pressing. 

This has raised the prospective yield on the company’s shares to 4.4%, higher than the average yield of the FTSE All-Share, which TMPL places at 3.4%. 

In the first half of 2025 however, revenue earnings were back up, with income from the trust’s underlying assets jumping 12.3% compared to the previous half of the financial year. 

Banks lead returns

It wasn’t just income that rose over the half year, as TMPL profited from savvy stock selection on both an absolute and relative basis. 

The trust delivered net asset value (NAV) total returns of 14.2% over the period versus 9.1% from the FTSE All-Share. 

Since Redwheel took over in October 2020, TMPL has returned 157% including dividends reinvested versus 79% for the index, according to data from Deutsche Numis. 

Performance was helped by large rises in Johnson Matthey (JMAT); banks Barclays (BARC), NatWest (NWG), Standard Chartered (STAN) and ABN Amro; insurance companies Aviva (AV) and NN Group; electrical retailer Currys (CURY); asset manager Aberdeen (ABDN); and BT Group (BT). 

In May, Johnson Matthey announced the sale of one of its divisions and its intention to return 90% of the proceeds to shareholders. The division accounts for just one quarter of the company’s profits and yet the sales proceeds accounted for around two thirds of its market value at the time of the announcement. 

‘It is perhaps unsurprising therefore that the shares responded very favourably on the day, rising by more than 30%. Despite this strong performance, we continue to believe that the shares are significantly undervalued,’ said the managers. 

On the other side, advertising giant WPP Group (WPP) was the biggest detractor.   

The trust also established new positions in Smith & Nephew (SN), Carrefour, and Korean banks Hana Financial and Woori, and added to its position in Valterra Platinum, purchases funded by marginal reductions elsewhere.

TMPL received shares in Valterra Platinum after Anglo American (AAL) spun out of the majority of its shares in Anglo Platinum, which was renamed. TMPL subsequently added to the position betting on low prices and lack of investor interest. 

‘Although this is a volatile business and it therefore accounts for a small percentage of the trust’s assets, the platinum demand supply dynamic looks attractive at the current time, and this could lead to stronger platinum prices and improved profits over time,’ said Lance and Purves.

‘Interestingly, platinum prices have already risen by more than 30% since the time of the demerger at the beginning of June.’

TMPL has outperformed its average UK Equity Income peer over one, three and five years. According to the Association of Investment Companies, share price total returns were 30.3% over one year versus the 12.7% mean. 

Deutsche Numis analyst Ash Nandi said the trust benefits from ‘a well-defined value approach’ and its managers are ‘not afraid to take high conviction positions on both a sectoral and stock basis, reflected in a relatively concentrated portfolio’.

‘The fund is currently trading at NAV, much tighter than the average discount of 5% over the last year, which we expect is fuelled by the strong run for relative performance since early 2025,’ she said.