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LSE:BUT
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Brunner Investment Trust relishes its geographic diversity

Snapshot

  • Formed in 1929 and managed by Allianz
  • Brunner has a global and sector agnostic remit
  • The trust is one of trade body the AIC’s ‘dividend heroes’
The Brunner Investment Trust - Brunner Investment Trust relishes its geographic diversity

Quick facts: Brunner Investment Trust

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LSE:BUT

Price: 1050.7999 GBX

Market Cap: £448.62 m

What it does

Brunner Investment Trust PLC (LON:BUT) has been around a long time and is a balanced fund focusing on income allied to capital growth.

Formed in 1929 by the Brunner family (who still own a 29% stake), the trust is managed by Allianz Global Investors, with Matthew Tillett taking over as senior portfolio manager this year after four years working on the fund.

At around sixty companies, it is a concentrated portfolio and the mandate is to meld income with growth.

ESG (environment, social and governance) is also becoming increasingly important and companies that fail in this regard and do not show any signs of improvement are unlikely to be considered as investments.

Brunner will have raised its dividend for 49 years on the trot based on the latest full-year results released in February.

How it’s doing

The company outperformed its benchmark comparison index in the year to the end of November 2020.

Its net asset value per share on a net dividends basis (with debt priced at fair value) rose by 6.2% in a year when for at least half of that period the global economy was rocked by the coronavirus pandemic.

In contrast, the company’s preferred benchmark measure comprising 70% of the FTSE World index (excluding the UK) and 30% of the FTSE All-Share index rose by 5.3% on a total return basis over the same period.

The period was characterised by a number of companies suspending dividend payments during the period of uncertainty and as a result, the investment trust’s earnings per share declined to 16.0p from 21.7p the year before. The company dipped into cash reserves to raise the dividend to 20.06p from 19.98p the year before, thereby extending a record of increased dividends stretching back 49 years.

What the manager says

“We’re not setting out to buy companies with high dividend yields. We look at income when we come to portfolio construction,” Tillett told Proactive.

“Our bias to quality means we’re looking for companies with differentiated business models that we think can sustain high returns over the long term and ideally with a decent amount of growth. And we’re looking to buy them on attractive valuations where those long-term dynamics are not priced in.”

"In a year where income funds the world over have been hit by the effects of the coronavirus pandemic as companies scrapped and suspended dividends, the trust remained a staunch source of income.

“One of the great things about Brunner is that it can offer this yield but it’s not a burden – it’s not something that we having to stretch the portfolio’s balance sheet to try and achieve,” Tillett adds.

“The trust has been able to deliver this long-term track record of such impressive dividend growth over the very long term as we’re owning good quality companies that fundamentally have the capacity and ability to keep growing free cash flows and keep growing their dividend.”

Inflexion points

  • Company has raised the dividend payment for 49 years consecutively.
  • Philosophy is concentrated on stock picking
  • Remit is wide and global

What the market says: Edison (February)

"BUT is currently trading at a 14.0% discount to cum-income NAV, which is wider than the 10.2% to 12.1% range of averages over the past one, three, five and 10 years.

"Given the trust’s long-term record of outperformance and the very smooth manager transition, arguably a narrower discount is warranted. BUT has increased its dividend for the past 48 consecutive years and currently offers a 2.3% yield."

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