Tuesday, 28 February 2017

Law Debenture - Final Results


As it is now 3 years since my previous post on this one, I think an update on progress is overdue.

The objective for this investment trust is to achieve long term capital growth in real terms and steadily increasing income. The aim is to achieve a higher rate of total return than the FTSE All-Share Index through investing in a portfolio diversified both geographically and by industry.

Although this is categorised as a global trust, 70% of the portfolio are UK listed equities. The rationale for this is that most of these companies derive a significant proportion of their profits from overseas operations. The remainder of the portfolio are comprised of Europe (8%), N. America (12%) and Asia/Japan - mainly via funds (7%).

The trust has today issued results for the full year to 31st December 2016 (link via Investegate). Net Assets total return for the year was 16.9% compared to 16.8% for its benchmark FTSE All Share Index.

This is a good return for just one year, however, compared against other trusts in the same global sector, it is near the bottom of the table. Trusts such as Bankers, Alliance Trust and Monks have returned over 40% in 2016.

3 Yr Chart  LWDB -v- Bankers IT

Likewise over the past 5 years Law Debenture is propping up the bottom of the league table with a return of 72% compared to well over 100% for the likes of Witan, Bankers and Foreign & Colonial for example.

Income

Revenues increased by 2.5% to 18.56p per share and the proposed full year dividend will be increased by 3.0% to 16.7p (2015 16.2p). The trust has either held or increased the dividend in each of the past 46 years.

In addition to the investment trust, it also has a fiduciary services business which contributes to overall profits but the value of this business.  Earning from this business were 7.6p per share and the value the fiduciary business is estimated at 62p per share. 

The costs remain low with ongoing charges at just 0.45% and no performance fee. Also portfolio turnover rate is low at around 10%.

I now have to review whether to continue holding LWDB in my SIPP drawdown portfolio due to the underperformance compared to other options. Having said that, the return of 72% over the past 5 yrs is better than my Vanguard LS 60 and it provides a steady natural income - current yield is 3.0%.

I should have a decision by the time of my SIPP portfolio review in June.

As ever, this article is merely a record of my personal investment decisions and should not be regarded as an endorsement or recommendation - always DYOR!

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