United Kingdom Investment Trust: Never Before Has the UK Shown Such Attractiveness
High Yield, High Gains: Abrdn Equity Income Trust Bucks the Trend
In a sea of slow-growing investment trusts, Abrdn Equity Income Trust (AEI) stands out, defying the norm with its expansion mode.
Fueled by impressive returns of 24.2% over the past year, the trust recently issuing 175,000 new shares to raise over £600,000. Driven by manager Thomas Moore, the excess funds were immediately invested in the UK market.
For Moore, a seasoned manager with over 13 years at the helm, the successful share issue signifies a newfound interest from investors towards the UK stock market.
"I'm licking my lips," Moore admits. "The market is in a sweet spot after years of neglect."
The trust's unique blend of a healthy 6.4% annual dividend yield and impressive share price gains is undeniably enticing for investors. Moore emphasizes, "We're striking a winning formula; a mix of income and growth."
Investors Take Notice
The numbers don't lie. Over the past year, AEI has outperformed both the FTSE 100 and the FTSE All-Share Index, while averaging over 13.6% growth against its UK equity income peer group.
Additionally, the trust boasts a 24-year streak of annual dividend growth, offering investors consistent returns. In the last fiscal year alone, AEI declared dividends totaling 22.9p per share, with two dividends already paid this year, each worth 5.7p per share. With current share prices hovering around £3.56, these payouts present an attractive proposition for income-seeking investors.
Not only does the trust's stock value surpass the underlying asset value, but it also demonstrates stability by trading at a small premium.
Moore's Move: Finding Value in the UK Market
Moore follows a strategy of seeking out undervalued UK shares with attractive dividend yields. He prefers to stay close to the companies they invest in, convinced that there are numerous good value companies across the market.
One of his favorite stocks is airline Easyjet, despite its modest 2% dividend yield. Moore is optimistic that the company has the potential to double its earnings as it completes investment in new and larger planes, boosting earnings, and ultimately redirecting more capital towards dividend payments and share buybacks.
"Easyjet is a diamond in the rough," Moore suggests, "with an overlooked value compared to its rivals like Ryanair."
While Moore expresses satisfaction with the trust's performance, he remains cautious, acknowledging the challenging economic backdrop and the potential disruptions in the bond markets.
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Enrichment Data:
Overall:
Abrdn Equity Income Trust (AEI), managed by Thomas Moore, employs an index-agnostic approach aimed at delivering high income from a carefully selected, diversified equity portfolio. The trust emphasizes fundamental analysis, a focus on robust business models, and healthy balance sheets to identify companies with the potential for consistent dividend growth.[1]
This active, high-conviction investment approach attracts investors seeking stable equity income while maintaining flexibility to capitalize on market opportunities.[1] The diversification strategy also helps to mitigate company-specific risks.[1]
Additionally, the trust makes use of modest gearing (12.7% as of June 13, 2022) to potentially enhance returns, although this increases risk levels.[2] The management team's experience and track record build investor trust in the trust's ability to navigate diverse market environments.[1]
In summary, the combination of disciplined active management, significant income potential, diversification, judicious use of gearing, and a strong pedigree make Abrdn Equity Income Trust an appealing choice for investors seeking sustainable equity income.[1][2]
- The Abrdn Equity Income Trust, managed by Thomas Moore, is a finance-based investment opportunity that attracts investors seeking stable equity income while maintaining flexibility to invest in stock markets, especially the UK market.
- With an active, high-conviction investment approach, the trust emphasizes fundamental analysis, a focus on robust business models, and healthy balance sheets to identify companies with the potential for consistent dividend growth, demonstrating its commitment to investing in businesses.
