Murray International's return to form continues

The global equity income trust made a net asset value (NAV) total return of 14.7 per cent and share price total return of 11 per cent over 2017, albeit lower than the 40.3 per cent and 50.5 per cent NAV and share price returns it made in 2016. In 2017, its composite benchmark, which is 40 per cent FTSE World UK Index and 60 per cent FTSE World ex-UK Index returned 12.8 per cent, and FTSE World ex UK index returned 13 per cent. 

The trust plans a total dividend of 50p a share in respect of 2017, an increase of 5.3 per cent on the 47.5p it paid for 2016. The trust currently has a yield of 4.1 per cent, the second highest in The Association of Investment Companies (AIC) Global Equity Income sector.

Bruce Stout, manager of Murray International, said that he has kept a low exposure to the US and other developed markets such as the UK and parts of Europe, preferring stocks listed in emerging markets and Asia. This held back performance between 2012 and 2015, but is now benefiting the trust.

Mr Stout has long been wary about US company debt levels, and their ability to produce income. This, along with the use of bonds, differentiates Murray International from other global equity investment trusts. Mr Stout plans to continue his policy of lower exposure to "debt-dependent" areas such as the US, and to remain invested in stocks that operate in countries that are self-reliant in terms of economic growth.

"The monumental debt overhang means the more the cost of money [interest rates] rises, the more likely credit-dependent growth evaporates," he said. "Against this backdrop, great scepticism is warranted."

Analysts remain upbeat about the trust's prospects following the results, with many praising its strategy of using both stocks and bonds for defensive income. The trust has gearing (debt) of about 12 per cent, which it has used to help finance the bond investments.

Iain Scouller, managing director of investment funds research at broker Stifel, has reiterated his positive rating on Murray International. "We like the manager's high dividend yield and the 5.3 per cent annual dividend growth is attractive," said Mr Scouller.

Many analysts expect the trust's dividend to continue to be covered by income. The trust also has a £75m revenue reserve, which it could use if its income is ever materially affected to maintain a progressive dividend policy.

However, while emerging markets have recently performed well they incur risks such as volatility. 

"The portfolio has become increasingly skewed towards emerging markets and has a notably larger [bond] allocation than its peers [so] performance will differ considerably from both peer group and benchmark," said Emma Bird, an analyst at Winterflood.

And due to a sharp 47 per cent rise in the trust's share price since January 2016 it now trades at a 5.7 per cent premium to NAV. Its board plans to issue shares to try to reduce this.

"This [would be] in all shareholders' interests as it seeks to reduce volatility in the premium or discount, while also making a small positive contribution to the NAV," said the trust's board.

Murray International Trust (MYI)

Source: Morningstar, *Winterflood, as at 14.03.18

Performance

Source: Winterflood as at 14 March 2018

Top 10 holdings as at  31.01.2018 (%)

Source: Morningstar

Geographic breakdown as at 31.01.18 (%)

Source: Morningstar