Alliance Trust, £3bn Dundee fund, ups dividend 32%

Alliance Trust plc, the £3.2 billion Dundee investment trust company which uses external fund managers Willis Towers Watson (WTW), said on Monday its total dividend for 2021 is expected to be just over 19p per share, an increase of 32.5% on 2020.

The widely-held Alliance Trust fund said in July that a court approved the conversion of its £645.3 million merger reserve into a distributable reserve.

In a stock exchange statement on Monday, Alliance Trust said: “In its most recent interim results published in July of this year, the board of Alliance Trust PLC announced that it was reviewing the level and funding of the company’s dividend payments.

“In particular, the board examined whether and on what basis a more attractive and sustainable level of dividend could be provided to shareholders in the future, without a change to the company’s investment objective or strategy.

“The board sought the feedback of shareholders, and would like to thank those who shared their views.

“After having completed its review, the board has concluded that the company’s dividend should be reset at a higher level and that it shall continue to declare year-on-year dividend increases in accordance with the company’s dividend policy.

“The board believes that delivering an increased, but still sustainable, level of dividend will benefit existing shareholders and enhance the attractiveness of the company’s shares.

“Accordingly, the company is today announcing a third interim dividend for 2021 of 5.825p, a 62% increase on the corresponding interim dividend of 3.595p last year.

“Subject to there being no material change in current circumstances before it declares its fourth interim dividend for 2021, the board expects to declare a fourth interim dividend for 2021 of the same amount.

“This one-off reset is therefore expected to result in a total dividend for 2021 of 19.054p, an increase of 32.5% on the company’s 2020 dividend.

“The new level of dividend is well supported by the company’s investment strategy and significant distributable reserves which stood at over £3.3 billion as at 30 June 2021.

“The increase will not result in any change to the company’s dividend policy, nor to its investment objective or its global equity, multi-stock picker investment strategy.

“The board will continue to take advantage of the company’s structure as an investment trust and will use both its investment income and its distributable reserves to fund dividend payments.”

Alliance Trust PLC chairman Gregor Stewart said: “Shareholder feedback has indicated that there is support for a higher dividend, as long as it is sustainable and affordable.

“The expected recovery in the income from the portfolio and flexibility afforded by our extensive and recently enhanced distributable reserves means that an increased level is affordable and that our track record of annual dividend increases can be sustained.

“We have therefore decided to reset the dividend to a more attractive level.

“Combined with strong investment performance, we believe resetting our dividend will reinforce Alliance Trust’s position as an attractive core global equity investment, providing shareholders with a real return through a combination of capital growth and a rising dividend.”