Murray Income Trust (LSE: MUT) delivered its forty-first consecutive annual dividend increase last year. And picking great dividend shares, such as the ones I look at below, has helped the trust outperform the FTSE All-Share Index over the past three, five and ten years.
Market conditions may be volatile at present, but Murray remains “confident that the best way to generate attractive long term returns is to invest in globally competitive businesses with robust balance sheets and experienced management teams”.
Vodafone has an experienced management team led by chief executive Vittorio Colao, who was appointed in 2008, having previously held a number of senior country and regional positions within the group.
Vodafone had net debt of £29bn at the last tally. A big number in absolute terms, but the market capitalisation is £62bn, and the balance sheet is strong relative to sector peers. Furthermore, Vodafone has just completed a massive three-year investment programme, so cash flow should improve significantly going forward.
The chief executive said last month: “We continue to face regulatory and competitive challenges in many markets, but we are confident that the business is well positioned for the growth opportunities ahead”.
Vodafone is one of the higher-yielding blue chips held by Murray Income Trust. The mobile giant is forecast to deliver an 11.48p dividend for its financial year ending 31 March, giving a yield of 5.3% at a share price of 216p. Analysts see the dividend ticking up at least in line with inflation for the next couple of years.
Unilever is Murray’s biggest holding. And you’d be hard-pressed to find a better example of the kind of globally competitive business with robust balance sheet and experienced management team that the trust seeks to invest in.
Chief executive Paul Polman is a veteran of the consumer goods industry, having started at Proctor & Gamble in 1979 and done a stint at Nestlé, before joining Unilever in 2008. Unilever has modest net debt of £8.5bn, and the company’s global reach and competitiveness are amply demonstrated by sales growth ahead of its markets and a rising operating margin.
Unilever’s shares are trading at 3,070p, and with an 88.49p dividend paid for 2015, the trailing yield is a relatively modest 2.9%. However, the trade-off is reliability, with annual mid to high single-digit dividend increases forecast to continue.
Murray Income Trust has been adding to its holding in asset manager Schroders this year. Schroders was established in 1804, and continues to be controlled by descendents of the founders. You don’t survive for over 200 years without being adept at management succession-planning and having a wealth of experience to draw on — currently embodied by 83-year-old Bruno Schroder, a non-executive director and member of the nominations committee.
With a strong balance sheet and prudent management, Schroders weathered the 2008/9 financial crisis with little problem. The dividend has increased from 37p in 2010 to 87p last year. At a share price of 2,700p the trailing yield is 3.2%, although if you buy the non-voting share class (ticker SDRC) at 2,056p, you get a yield of 4.2%.
Dividend growth is forecast to moderate after the tremendous increases of recent years, but Schroders remains an appealing stock in the financial sector, which is not exactly renowned as a bastion of long-term, prudent management.