Temple Bar Investment Trust is eyeing a 14% increase for its full year dividend after revenues came in better than expected over the first six months of the year.
Despite its preferred value style of investment being back in favour, the £826.4m trust only just outperformed the FTSE All Share, returning -4% on a net asset value basis versus the index’s -4.6%. Its share price return was 0.2%, thanks in large part to it buying back 2 million shares, which narrowed the discount from 7.8% to 3.8%.
Its holdings in oil majors Shell, BP and Total Energies were among its biggest winners during the period, alongside Standard Chartered, Vodafone and Pearson. However, this was offset by underperformance in its domestically-focused names, like Royal Mail and Marks & Spencer, which saw their shares slide as recession fears ramped up.
Chairman Arthur Copple said: “Rarely has it been so difficult to predict the future. Inflation in the UK gets ever higher and recession may be just around the corner. The terrible events in Ukraine and the pressure that, inter alia, has put on energy and commodity prices all add to the uncertainty. The domestic political situation is unclear.”
Revised dividend implies 4% yield
Despite the shakier start to the year, Copple said revenues had been “much more buoyant than expected,” and, as a result, the trust has raised its dividend guidance for the full year from 8.2p to 9p per share.
Investec said the 13.9% increase was a pleasing result for shareholders, especially following the “decisive albeit difficult decision to rebase the dividend following the onset of the pandemic”.
Temple Bar is currently yielding 4%, an 18% premium to the FTSE All Share, which is only yielding 3.4%.
Redwheel duo Ian Lance (pictured) and Nick Purves took over the trust from Ninety One in October 2020, just as value stocks began to hit their stride, following 14 years of severely lagging their growth counterparts. Since then, the trust has generated NAV and shareholder total returns of 64.8% and 70.8% respectively, Investec noted, “materially ahead” of the FTSE All Share total return of 39.9%.
“Looking forward, we like the focus on quality companies with strong cash-flows and robust balance sheets, with the value philosophy providing a margin of safety in what we expect to remain a highly challenging environment,” Alan Brierley, director of investment company research, said. “We maintain our buy recommendation.”