Aberdeen Standard Equity Income Tst New Research: Kepler Trust Intelligence

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Aberdeen Standard Equity Income Tst

20 May 2019

Aberdeen Standard Equity Income Trust: New research

20/05/19

-- The long-standing manager, Thomas Moore, utilities a bottom up approach to identifying opportunities, and is entirely index agnostic in his approach...

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Aberdeen Standard Equity Income aims to offer investors an above-average income, while also providing real growth in capital and income for investors. This is achieved through investing in a diversified portfolio of predominantly quoted UK equities.

The long-standing manager, Thomas Moore, utilities a bottom-up approach to identifying opportunities, and is entirely index agnostic in his approach. The end result is a portfolio very different to peers and the benchmark. A stand out characteristic of this is the bias towards the FTSE 250, offering exposure to considerably more growth companies than peers and a typical equity income trust. This is illustrated in the fact that over 60% of the portfolio is invested outside the FTSE 100, showing Thomas's ability to find companies in unloved areas and take advantage of areas that other managers may be overlooking.

For Thomas, the valuation of a company and its cash flows are the most important metrics and he hopes to invest in companies that have high dividend growth potential and a high yield, but with potential for a re-rating in the future.

Over the past five years the performance has been volatile, and the trust has struggled to keep up with the benchmark. However this is principally due to the out of favour, value-driven approach of the manager. In particular Q4 of 2018 hindered performance, however the trust has since recovered some of the losses in 2019 and the trust has outperformed the benchmark FTSE All Share year-to-date.

The trust has an exceptional record for dividend increases, growing the dividend for 18 consecutive years. Last year saw an increase of over 12%, despite there being considerably fewer special dividends than the year before.

The trust is currently trading on a discount of 6%, wider than the sector weighted average discount of 3.5% and the trust's one-year average discount of 1.9%. Should we see the uncertainty surrounding the UK dissipate, the discount would likely return back close to par.

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May 20, 2019 02:01 ET (06:01 GMT)