Edison issues review on The Merchants Trust

London, UK, 19 March 2021

Edison issues review on The Merchants Trust (MRCH)

The Merchants Trust (MRCH) is managed by Simon Gergel at Allianz Global Investors. He suggests the company is 'in a much better place' compared with early 2020. The manager now has more confidence in the trust's income prospects as dividends are resuming and in some cases being raised, and he has been able to take advantage of stock market volatility to reposition the portfolio. Gergel believes MRCH's shareholders appreciate how the trust's investment process remains consistent despite periods of market volatility, while the board's progressive dividend policy provides an attractive income stream in excess of the UK market. This is reflected in MRCH's relative performance, which has improved considerably in recent months. The trust currently offers a 5.5% dividend yield, the second highest of the 17 larger-cap peers in the AIC UK Equity Income sector.

The trust is in an improved position regarding income than it was six to nine months ago as exposure to higher-yielding companies has increased, more firms are considering paying a dividend now their balance sheets have been repaired, and the manager expects a significant income recovery in FY22 (ending 31 January 2022). At the end of FY20, the trust had more than one year's annual dividend in revenue reserves, which is available to sustain MRCH's 38-year record of consecutive annual dividend increases.  
 

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