For long-term investors, especially those seeking regular income, strong investment returns and dividends bring welcome peace of mind.

These attributes form the cornerstones of The Mercantile Investment Trust’s investment strategy. The Trust’ NAV, which invests in the UK’s medium- and smaller-sized companies, has delivered positive returns and outperformed its benchmark over the short term, and over the one-, three-, five- and 10- year periods ended 31 March 2024.¹ This amounts to average annualised returns of 6.7% over a ten-year period, well ahead of the average annual benchmark.²

Not that past results can predict future ones, The Mercantile’s dividend payment record has  also been  competitive. Its annual dividend has been maintained or increased every year since 1992, including during the pandemic, when many companies suspended dividend payments to protect their liquidity. This has been achieved by careful management of the Trust’s income reserves. Over the 10 years ended 31 January 2024 (the Trust’s financial year end), the annual dividend has risen by an average 6.7% per annum, ahead of average annual inflation of 2.8% over this period.³

The total dividend for the Trust’s 2024 financial year was 7.65 pence per share, representing a dividend yield of 3.6% based on the share price at 31 January 2024. Dividends are not guaranteed but This is one of the highest among the trust’s AIC peers. This dividend track record also places The Mercantile in the ranks of the AIC’s next generation of dividend heroes, comprising investment companies which have increased their dividend every year for 10 years or more.⁴

But what is the secret of such steady growth in both capital and income? In short, a very experienced investment team and a considered, disciplined investment process, backed by deep and systematic research and prudent risk management.

The Mercantile’s Portfolio Manager, Guy Anderson has more than 20 years’ industry experience, and Anthony Lynch has worked alongside him since 2009. They draw on JPMorgan’s extensive research resources, including a dedicated team focused on the mid and smaller cap sector - an area of the market that needs careful, first-hand scrutiny, as many stocks in this sector are overlooked by other investors.

The team’s rigorous stock selection approach aims to identify the best stocks in the market - high quality, resilient, nimble businesses that possess significant opportunities for growth. All portfolio holdings must satisfy fundamental quantitative criteria to ensure they have sustainable business models capable of generating earnings growth and profits over the long term. Valuations are a further important consideration, and the managers are careful not to overpay for attractive businesses.

It is clear from this process that the managers are not targeting a few, isolated success stories. Every one of the portfolio’s 75 or so holdings is expected to contribute towards strong, long-term returns for shareholders. And if it does not, the position is closed to make room for more reliable performers. This ensures that over time, returns are generated across the portfolio, from a number of stocks, drawn from a variety sectors.

In addition to the careful selection of a diversified portfolio of stocks, the investment process also has inbuilt risk controls to protect performance from unwelcome volatility generated by unanticipated stock specific events. For example, the size of any one position is capped at 8% of total assets, and there is a further limit on the number of large holdings. A gearing limit of 20% of total assets constrains the managers’ ability to exposure the portfolio to market risk.

In sum, The Mercantile’s investment strategy and careful risk management mean that investors can be confident that they are in the hands of seasoned professionals focused on delivering reliable and consistent returns and steadily rising dividends over the long term.

¹ J.P. Morgan Asset Management/Morningstar. Net asset value performance (NAV) data has been calculated on a NAV to NAV basis, including ongoing charges and any applicable fees, with any income reinvested, in GBP. Factsheet, 31 March 2024. Past performance is not a reliable indicator of current and future results. 

² Factsheet 31 March 2024 – Benchmark FTSE All-Share (ex FTSE 100, ex Inv Companies) (£) at 4.5% 

 ³ Annual Report 2024, page 11, data to 31 January 2024. Inflation data source: Office of National Statistics. Calculated on a cumulative basis, rebased to 100 as at 31st January 2014. Past performance is not a reliable indicator of current and future results. 

⁴ Association of Investment Companies (AIC): Eight investment trusts join the next generation of dividend heroes, 19 March 2024.

Summary Risk Indicator

The risk indicator assumes you keep the product for 5 year(s). The risk of the product may be significantly higher if held for less than the recommended holding period.

Investment objective: Aims to achieve capital growth through investing in a diversified portfolio of UK medium and smaller companies. It pays quarterly dividends and aims to grow its dividend at least in line with inflation. The Company’s gearing policy is to operate within a range of 10% net cash to 20% geared.

Key Risks: 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. Companies listed on AIM tend to be smaller and early-stage companies and may carry greater risks than an investment in a Company with a full listing on the London Stock Exchange.

This is a marketing communication and as such the views contained herein do not form part of an offer, nor are they to be taken as advice or a recommendation, to buy or sell any investment or interest thereto. Reliance upon information in this material is at the sole discretion of the reader. Any research in this document has been obtained and may have been acted upon by J.P. Morgan Asset Management for its own purpose. The results of such research are being made available as additional information and do not necessarily reflect the views of J.P. Morgan Asset Management. Any forecasts, figures, opinions, statements of financial market trends or investment techniques and strategies expressed are unless otherwise stated, J.P. Morgan Asset Management’s own at the date of this document. They are considered to be reliable at the time of writing, may not necessarily be all inclusive and are not guaranteed as to accuracy. They may be subject to change without reference or notification to you. It should be noted that the value of investments and the income from them may fluctuate in accordance with market conditions and taxation agreements and investors may not get back the full amount invested. Changes in exchange rates may have an adverse effect on the value, price or income of the products or underlying overseas investments. Past performance and yield are not reliable indicators of current and future results. There is no guarantee that any forecast made will come to pass. Furthermore, whilst it is the intention to achieve the investment objective of the investment products, there can be no assurance that those objectives will be met. J.P. Morgan Asset Management is the brand name for the asset management business of JPMorgan Chase & Co. and its affiliates worldwide. To the extent permitted by applicable law, we may record telephone calls and monitor electronic communications to comply with our legal and regulatory obligations and internal policies. Personal data will be collected, stored and processed by J.P. Morgan Asset Management in accordance with our EMEA Privacy Policy www.jpmorgan.com/emea-privacy-policy. Investment is subject to documentation. The Annual Reports and Financial Statements, AIFMD art. 23 Investor Disclosure Document and PRIIPs Key Information Document can be obtained in English from JPMorgan Funds Limited or at www.jpmam.co.uk/investmenttrust. This communication is issued by JPMorgan Asset Management (UK) Limited, which is authorised and regulated in the UK by the Financial Conduct Authority. Registered in England No: 01161446. Registered address: 25 Bank Street, Canary Wharf, London E14 5JP.

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