A 50-year track record of dividend growth appears more valuable than ever
JPMorgan Claverhouse Investment Trust plc seeks to provide growth and income, with an investment strategy focused on investing in blue chip UK companies and a dividend that over the last 10 years has grown at an annualized rate exceeding 5% per annum.
Seeking sources of stability in volatile UK markets
Like many UK equity investors, JPMorgan Claverhouse Investment Trust’s experienced portfolio managers have found the recent market environment to be challenging. However, the Company’s strategy and the team’s long-term perspective can potentially provide some stability in these turbulent times.
The portfolio managers seek to invest in companies with resilient earnings—those with established businesses, competitive advantages and diversified revenue streams, including overseas earnings. As a result, the portfolio tends to invest in mainly large-cap, blue chip UK companies and is currently 90% invested in FTSE 100 listed stocks. Investing in larger-cap companies with good liquidity also allows the GBP 450 million trust flexibility to re-position its portfolio as needed.
Another pillar of Claverhouse’s stability is its annual dividend. Although dividends are not guaranteed, for 50 consecutive years, the Company has paid a growing dividend. By adding to revenue reserves, the Claverhouse board of directors has been able to continue increasing its dividend even in years with lower dividends paid by portfolio companies. Dividend paid by the product may exceed the gains of the product, resulting in erosion of the capital invested. It may not be possible to maintain dividend payments indefinitely and the value of your investment could ultimately be reduced to zero. Dividend payments are not guaranteed.
While the short-term outlook across the UK market remains challenging, income streams from dependable dividend payers should provide some welcome certainty for investors. Furthermore, the universe of companies currently paying healthy dividends is broad, including domestically focused and multinational companies, which gives an important layer of diversification to the portfolio.
Benefiting from a barbell portfolio of both growth and value
While the market backdrop may be volatile, the trust aims to outperform the market over the business cycle. A key element of the portfolio’s strategy helps to maintain an overweight exposure to both growth and value—at all times. This helps to create a balanced and diversified portfolio with exposure to a wide range of potential drivers of share price appreciation.
Growth stocks currently tend to fall into three broad categories: market share gainers, renewables and pharmaceuticals. With its active allocations at the discretion of the investment managers, they seek companies that operate in growing but fragmented markets, where leaders, such as Ashtead and RS Group for example, have the opportunity to take market share through technological innovation and well managed supply chains leading to better service to customers. Often acquisitions of smaller players augments growth. Companies involved in renewable energy, such as SSE and Drax for instance, also offer strong growth potential because they tap into the urgent need to transition to low-carbon energy and improve energy security. The pharmaceutical companies in the trust, such as AstraZeneca, tend to have large, well-established businesses with strong top- and bottom-line growth potential.
When selecting companies with value characteristics, the portfolio managers look for resilient earnings and are careful to avoid “value traps” – companies that appear cheap on valuation metrics but lack the potential for consistent earnings. The trust currently has positions in commodity-related companies, including several miners that have focused on value over volumes, leading to consistently high cash generation and returns for shareholders, and a few oil conglomerates that have been improving their balance sheets while generating strong cash flow and trading at attractive valuations. The trust also has investments in several banks, which should benefit from rising interest rates and currently have low valuations and strong capital positions.
Volatile market environments will come and go, but JPMorgan Claverhouse Investment Trust will keep investing with its time-tested strategy and seek to continue a five decades-long track record of dividend growth.
This is a marketing communication. Please refer to the investment trust information document and PRIIPs before making any final investment decisions
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Investment objective : The Company aims to provide a combination of capital and income growth from a portfolio consisting mostly of companies listed on the London Stock Exchange. The Company’s portfolio consists typically between 60 and 80 individual equities in which the Manager has high conviction. The Company has the ability to use borrowing to gear the portfolio within the range of 5% net cash to 20% geared in normal market conditions.
Risk profile : Where permitted, a Company may invest in other investment funds that utilise gearing (borrowing) which will exaggerate market movements both up and down. This Company may use derivatives for investment purposes or for efficient portfolio management. External factors may cause an entire asset class to decline in value. Prices and values of all shares or all bonds and income could decline at the same time, or fluctuate in response to the performance of individual companies and general market conditions. This Company may utilise gearing (borrowing) which will exaggerate market movements both up and down. This Company may also invest in smaller companies which may increase its risk profile. The share price may trade at a discount to the Net Asset Value of the Company. The single market in which the Company primarily invests, in this case the UK, may be subject to particular political and economic risks and, as a result, the Company may be more volatile than more broadly diversified companies.
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