The Temple Bar Investment Trust has hiked its dividend after a strong year of outperformance supported by strong stock selection and portfolio company share buy backs.
The trust employs a long-term value-investing approach to UK equities with high-yielding names such as Barclays, Shell, Aviva and Marks & Spencer in the portfolio’s top ten holdings.
“I am pleased to report that the Trust has again outperformed its Benchmark, the FTSE All-Share Index, by a significant margin,” said Richard Wyatt, Chairman of Temple Bar Investment Trust.
“The Net Asset Value total return with debt at fair value was +19.9%, the share price total return was +19.1%, and the total return on the FTSE All-Share Index was +9.5%. Since Redwheel took over the management of the Trust at the end of October 2020, the Net Asset Value total return to the end of 2024 has been 123.9% compared with 64.2% for the Benchmark, again a significant outperformance.”
The trust managers, Ian Lance and Nick Purves, are staunch value investors and have admirably stuck to their guns through the years of growth stocks dominating stock market returns. Their dedication to Temple Bar’s ’10 Pillars of value investing’ principles, including ‘Be contrarian but not mindless contrarian’ and ‘Bargains are rare, make the most of them’, is paying off for investors.
Temple Bar’s NAV growth of 19.9% in 2024 represents a material acceleration of 2023’s NAV growth of 12.3%.
Buy backs
The managers highlight the importance of share buybacks to overall performance, as UK equities remain undervalued compared to overseas peers.
“The Trust’s portfolio performed strongly in the year, significantly outpacing the rise in the UK equity market. Over one half of the companies in the Trust’s portfolio are or have been buying back stock in 2024 and these buy backs have undoubtedly been a key driver of portfolio returns,” explained Ian Lance and Nick Purves, co-managers of Temple Bar Investment Trust.
“The consensus view today is that American ‘exceptionalism’ will continue, suggesting to us that expectations are already high and that the potential for disappointment is great. The UK stock market in contrast contains a good number of neglected companies, where the bar of expectation is much lower, and where the likelihood of positive surprise is much greater. Accordingly, we believe that the long-term outlook for investment returns in the UK stock market is better.
“The ability to be truly long term is the biggest advantage that one can have in the stock market today, and we are optimistic that we can continue to use this advantage to generate excess investment returns for the Trust.”
Although share buy backs have contributed significantly to overall returns, Temple Bar is still a very good dividend payer for its investors.
Income investors will be pleased to see the trust hike its dividend by 17% to 11.25p per share, compounding a strong year of overall performance.
The trust is currently yielding 4.1%.
However, a change in the trust’s dividend policy is set to see dividends rise as Temple Bar amends its dividend to reflect the contribution of share buy backs.
“In recent years, companies have been altering the nature of their distributions to shareholders,” Richard Wyatt explains.
“Increasingly, they have been looking to provide investors with a return via share buybacks either alongside or instead of dividends. Unlike dividends, which are recognised as revenue in your Company’s accounts, and which underpin the dividends we pay, buybacks by portfolio companies have not contributed to the distributions paid to our shareholders. In order to address this distributional shift in the behaviour of portfolio companies, Temple Bar is proposing to amend its dividend policy to enhance the dividend it pays”
Temple Bar pays a quarterly dividend, which is set to rise from 3p to 3.75p, representing a 5% yield.