JPMorgan Claverhouse Investment Trust plc has provided shareholders with 52 consecutive years of divided growth, the longest track record of dividend growth for an investment trust invested in only UK equities.

Positioning the portfolio for future growth

Portfolio managers Callum Abbot, Anthony Lynch and Katen Patel are using their experience across UK equities to reposition the portfolio and capture a mix of income and growth that will support Claverhouse’s track record.

The UK equity market already offers a yield premium over other equity markets and Claverhouse’s yield is even higher, at close to 5%. A key element of Claverhouse’s investment strategy is how the portfolio managers think about—and achieve—long-term income.

The trust invests in a broad range of stocks that can deliver income into the future. The portfolio managers have been favouring quality stocks with potential to compound their earnings and dividend growth over high-yielding stocks with no growth or volatile earnings.

In addition, the team has expanded its small and mid cap exposure, drawing on the significant experience of portfolio manager Anthony Lynch in this area of the UK market. Claverhouse has exited its position in the JPMorgan Small Cap Investment Trust and is focusing on small and mid cap stocks that best fit the portfolio.

Increasing exposure to long-term income growth

Claverhouse now has roughly 20% of the portfolio invested in higher growth stocks, which have a dividend yield of less than 2% but will drive income growth in the future. Cranswick, a food producer, is a smaller cap stock in this category. The company has grown its dividend for 34 years and management is as excited about the opportunity ahead as any time in past.

3i Group, a private equity specialist, is another high-growth company and continues to be a top contributor to returns. The portfolio managers believe its core holding in Acton Retail will continue to contribute to its growth for a long time.

Another 20% of the trust is in quality compounders, which are stocks with a dividend yield of roughly 2%-4%. XPS Pensions, a pension consultant with a capital-light business model, falls into this category.

More than half of the portfolio is still invested in high-yielding stocks that offer dividend yields over 4%. Importantly, however, the portfolio managers are focused on the sustainability of the yield and moving away from companies with volatile earnings.

UK banks are a key position in the high-yielding bucket, offering strong earnings growth and net interest growth. Management teams have demonstrated their focus on shareholder returns by offering attractive dividends and share buybacks. Claverhouse’s positions in NatWest and HSBC were big contributors to returns in the 12 months through 31 March 2025 and the portfolio managers added a new position in Barclays.

Telecom Plus is another addition to the portfolio. The company offers a yield premium to market but stronger growth prospects than companies with a similar yield. Telecom plus is growing its customer count and market share with its capital-light business model.

Reducing holdings in high-yielding stocks with less attractive businesses

The portfolio managers have been keen to reduce exposure to some businesses that may be more volatile as they make room for companies that offer higher-quality growth and income. For example, despite the high yields and share buybacks some tobacco companies offer, volumes in this industry have been consistently declining since the 1970s, forcing dividend cuts. The portfolio managers have trimmed the trust’s position in British American Tobacco.

The portfolio managers have been highly selective in the consumer staples sector, where some companies seem to have been more cyclical than many investors had believed. Claverhouse does not own shares in drinks company Diagio, which significantly contributed to returns in the 12 months through 31 March 2025. The portfolio is also underweight Unilever as the portfolio managers believe it will be challenging for the company to deliver high organic growth and preserve its margins in a competitive landscape; they prefer Tesco and Cranswick as quality defensive consumer companies.

Another recent trim was Glencore, a mining company whose earnings will always be somewhat dependent on the price of coal. The company’s trading business had previously been able to benefit from some of that volatility but recently has not been as profitable.

Outlook

The UK equity market continues to offer exceptional value vs. the US and European equity markets. UK consumers have cash to spend and are experiencing real wage growth, which usually leads to stronger GDP growth. A sustained increase in consumer confidence could be the catalyst. The services-led UK economy is also likely to be less impacted by US tariffs.

Claverhouse’s portfolio managers look to consider how the economic environment impacts each stock. Ultimately, they are focused on finding companies that offer the most attractive mix of income and growth across the entire UK equity market.