Increased dividend for 51 consecutive years: Murray Income

MUT has raised its dividend for 51 consecutive years…

Overview

 
Charles Luke and Iain Pyle, managers of Murray Income Trust (MUT), follow a disciplined ‘quality income’ strategy aimed at delivering long-term capital growth, resilient earnings, and sustainable, growing income to shareholders. They focus on high-quality companies in pursuit of this goal, particularly those with strong business models, robust balance sheets, and compelling ESG characteristics alongside attractive income profiles. They argue this combination enhances a company’s ability to navigate market volatility, reduce tail risks and provide a greater margin of safety—ultimately supporting their investment objectives.

Over the past 12 months, the managers have made several Portfolio changes, capitalising in particular on valuation dislocations. They have initiated positions in the likes of Rio Tinto and London Metric Property, both featuring good cash flows and solid balance sheets, with the added potential to benefit from sector tailwinds. Dunelm was also added to the portfolio for its highly cash-generative nature, strong earnings, and market position, along with adding select overseas investments, like ASML and DBS, Southeast Asia’s largest bank, which they believe bring unique attributes to the portfolio.

Performance over the past five years has been challenging. Whilst the quality income approach proved resilient during downturns and captured growth tailwinds in 2019 and 2020, it has hindered returns more recently. MUT tends to struggle in environments of rising or persistently high interest rates, as well as when cyclicals and lower-quality stocks lead the market—conditions that have dominated much of the past five years. This difficult backdrop may also have contributed to the trust’s Discount widening beyond its five-year average.

Despite challenges, MUT maintains a strong and appealing income profile, offering investors a premium yield to the market alongside its impressive 51-year Dividend growth record.

Analyst’s View

One of MUT’s key attractions, in our view, is its distinctive approach to UK equity income, blending quality with yield in a way that sets it apart from more value-driven strategies. The managers’ focus on financially robust companies with strong cash flows has fostered resilience during turbulent periods, whilst their emphasis on diversifying income streams—both across UK sectors and overseas—has underpinned a premium yield and a 51-year track record of dividend growth. Additionally, we think MUT’s relatively low volatility compared to peers is appealing, highlighting the defensive qualities of its holdings.

However, MUT’s strategy hasn’t been without challenges. Over the past five years, performance has been muted, largely due to its quality bias struggling in a market environment that has favoured cheaper, more cyclically sensitive stocks. This is a risk worth considering, and therefore, we think investors should temper expectations of strong relative performance in value-driven rallies.

That said, for investors seeking a steady and growing income stream underpinned by high-quality businesses with the potential for capital growth, MUT remains a solid contender. With the trust currently trading at a 10.6% discount—wider than its historical average—investors have an opportunity to access a portfolio of resilient, income-generating companies at an attractive valuation. If market conditions turn more favourable for quality stocks or sentiment towards UK equities improves, this discount could narrow, offering an additional boost to returns.

Bull

• Experienced lead manager with access to a deep pool of resources at abrdn
• A five-decade-long track record of growing the dividend
• Well-diversified list of UK businesses that also derive revenues overseas

Bear

• Balanced investment approach may lag a style-driven market
• Exposure to medium-sized companies may bring more sensitivity to the UK economy
• Gearing can magnify gains on the upside but also losses on the downside

See the full researh on MUT here >

_Disclaimer

_{This is a non-independent marketing communication commissioned by abrdn. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.}