The trust has been running for nearly 20 years and is foremost an income trust. It is currently paying an income of 4.94% but this is not guaranteed. The aim is to grow this yield by 6% per annum. Where the trust differs from other income funds is that it focuses only on small and mid-cap stocks. They have a hard rule that if a company enters the FTSE 100 they will sell. However, if the dividend is due on that stock they will hold until the dividend is paid.
Every stock in the portfolio must contribute to the yield. This is set at a minimum of 4%. There are three baskets of stocks and he looks at those with yields of 6% plus, those with yields of between 4.5% and 5% yields, and then those that pop into the 4% category. The last group tend to be deep value stocks where they have fallen for some reason and then suddenly re-rate, at which point the yield comes down and they sell the stock….read more