Dunedin Income Trust - Final Results

I hold this trust in both my ISA and income drawdown portfolios

They have just issued results for the full year to 31st January 2015( link via Investegate).

The headline is that NAV per share on a total return basis has increased 11.1% - compared to its benchmark the FTSE all-share index which increased by 7.1% over the previous year. Underlying income per share was fairly flat at 11.9p.

The Board is recommending a final dividend of 3.525p, which will make for a total of 11.25p for the full year (2014 - 11.10p) - an increase of 1.3%. A little disappointing but still a little ahead of inflation. At the current share price of  264p, the trust yields a handy 4.25% but share price appreciation has been below par for the past couple of years. Over the past 12 months, in common with other investment trusts in this sector, the share price has lost its premium and currently trades at a 7% discount to net assets.

I am pleased to see dividend reserves have again increased to £22.6m (2014 £21.4m) and now represents 135% of dividends paid out over the past 12 months.

The manager appears to experience increasing difficulty finding opportunities to add value for shareholders. In his report the lead manager Jeremy Whitley said :

"Finding companies that have exposure to growth markets, that meet our quality criteria and which can be purchased at sensible valuations is increasingly a difficult exercise…

With the income account now relatively stable we are seeking to put more money to work into mid sized companies. These often offer lower starting yields and consequently higher valuations but much better dividend and capital growth prospects. This may mean restricting a little the pace of income generation for a period as we reduce higher yielding but lower growth investments but we believe that investors will be well rewarded over the longer term from this process".

Portfolio turnover is again modest at just 0.08% - but an increase from the previous year (these costs for the average fund are over 1%). Ongoing charges for the trust are 0.69% - average for the UK income sector.

As ever, please DYOR.