Investors seeking a high conviction fund with a track record of attractive total returns should buy Schroder Income Growth Fund (SCF), a portfolio geared into the post-pandemic and UK domestic recovery.

Managed by Schroders’ head of UK equities Sue Noffke for a decade, the £222 million cap puts money to work with out-of-favour companies with potential to generate strong future returns and offers and offers an attractive yield of around 4%.

Since its 1995 launch, Schroder Income Growth Fund has raised the shareholder reward every year, with increases in the dividend outpacing the rate of inflation.

REAL GROWTH OF INCOME

Schroder Income Growth targets outperformance by investing in companies that pay dividends that should grow faster than the rate of inflation.

Adorned with ‘Dividend Hero’ status by the Association of Investment Companies (AIC), the trust successfully navigated the Covid dividend crisis to deliver a 25th consecutive year of dividend increase in the year to August 2020 and can deploy significant revenue reserves to keep growing its distribution, making it a compelling attractive proposition for income-seekers.

Income received during the half to February 2021 fell 46% due to some companies cutting or eliminating dividends. However, with companies reinstating payouts and the portfolio re-orientated towards those firms that are paying dividends, a greater proportion of which are expected to be paid in the second half of the trust’s financial year to August 2021, Noffke is confident the trust can build on its dividend growth  track record.

GOLD BLEND

The trust’s objectives are to provide real growth of income, being in excess of the rate of inflation, and capital growth as a consequence of the rising income.

A focused portfolio of ‘bottom up idiosyncratic stock picks’ according to Noffke, Schroder Income Growth is nimble in size. It can invest across the cap spectrum to deliver attractive returns in any market conditions, whether the growth, value or momentum style holds sway.

Noffke says her approach is to be ‘pretty style agnostic in delivering capital returns, albeit with a bit of an income skew.

‘There is a very slight value bias over time but quite style agnostic in that I will incorporate both growth situations and value situations into the trust to give a blended approach, which means over time I can deliver very consistent levels of capital returns to shareholders.’

With 44 holdings at last count, positions range from historically reliable dividend payers AstraZeneca (AZN) and Unilever (ULVR), to a diverse array of names contributing to income growth.

These include cash generative miners such as Anglo American (AAL), returning cash to shareholders through dividends and buybacks, as well as exciting names for future growth including recruitment consultant SThree (STEM).

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