£1.3bn trust that’s banking on 57 years of growing dividends

INVESTMENT trust The Bankers is designed to represent the best of asset manager Janus Henderson – and from an income perspective, it ticks all the boxes. The 135-year-old stock market-listed fund has an annual dividend growth record stretching back 56 years – only one rival investment trust (The City of London) has matched this feat.

And it seems that come hell or high water, the board of this £1.3 billion trust is determined to extend the record far into the future.

For the record, The City of London is also run by Janus Henderson.

Earlier this month, announcing the trust’s results for the financial year ending November 30, 2022, the board said dividend growth for the year ahead would be at least five per cent.

Alex Crooke, the trust’s manager, says: ‘In the previous year, the dividend growth target was three per cent, but we achieved seven per cent. Five per cent, which implies an annual dividend of 2.44pence, is a good starting point for the current financial year. We could be in a position to pay more.’

The fund pays quarterly dividends. Changes to the trust’s portfolio should help facilitate dividend growth as the fund moves from a big focus on growth stocks (especially US technology companies) to a broader portfolio encompassing both growth and more defensive stocks such as banks which are now paying dividends.

‘We’re slowly changing the focus of our exposure to financials,’ says Crooke. ‘Previously, it was heavily built around financial companies specialising in transactional business, such as Mastercard. Now, we like the big American banks such as JPMorgan Chase and Co – and in the UK, Lloyds is a favourite.

‘Higher interest rates mean higher interest margins [the difference between savings and mortgage rates] and the potential to make more profit and pay shareholders dividends.’

Although Crooke oversees the trust’s assets, he is more of a conductor than a hands-on manager.

The fund’s portfolio is sliced into six geographic portions and managed by six Janus Henderson investment teams based around the world.

Crooke’s role is to ensure the asset allocation is spot on. His view in broad terms is that the trust should have around a third of its assets in the world’s three biggest economic regions – Europe (including the UK), North America and Asia.

It means its performance diverges from the FTSE World Index that it aims to outperform, which is heavily concentrated around North American stocks.

Over the past five years, the trust has underperformed the index – primarily because of its underweight position in the United States – although in its defence it has delivered better overall returns than the average global investment trust (27 per cent versus 15 per cent).

The fund’s total annual charges are reasonable at 0.48 per cent while some expensive debt (costing eight per cent a year) will be cleared by the end of the financial year. This will eliminate a drag on performance, while leaving cheaper borrowing in place.

Crooke says the year ahead will have its challenges, with high interest rates and persistent inflation depressing both investment and consumer spending. Profit warnings, he says, will be to the fore. But matters will improve towards the end of the year as interest rates stabilise. As a result, Crooke believes there will be opportunities during the year to ‘bottom-fish’ – buy good companies at favourable prices.

The trust’s stock market ID code is BN4NDR3 and the market ticker is BNKR. The shares currently trade at just over £1, implying a modest (but growing) annual dividend equivalent to 2.2 per cent.