Following its merger with Shires, the strengthened Aberdeen Equity Income Trust (AEI) has delivered a strong H1 performance. For the six months to March 2026, the trust generated an NAV total return of 9.9%. That compares with an 8.9% total return for the FTSE All Share index.
Dividend Hero
Following the successful integration of Shires Income, AEI increased its assets by over £120 million. More than 96% of Shires shares were rolled over, demonstrating investors’ faith in the strategy.
Not only did the trust beat the benchmark in H1, it is now outperforming over one, two and three years. Moreover, with the shares trading at a premium to NAV the company has been able to raise fresh capital.
Managers Thomas Moore and Iain Pyle say they are still finding attractively valued stocks which meet their criteria. ‘ By getting the basics right – choosing companies which are generating the cash flow to pay attractive dividends and buy back their own shares – we are also being rewarded with rising share prices which are translating into excellent capital growth for our shareholders’, add the managers.
WIth 25 years of successive dividend increases under its belt, the trust is a core member of the AIC’s presitgious ‘Dividend Heroes’. The board expects to raise the dividend again this year to a minimum of 23.1p per share.
Successful stock picking
The biggest single contributor to growth in H1 was Energy, where the trust is overweight. Holdings in BP (LON:BP.), Diversified Energy (LON:DEC), Harbour Energy (LON:HBR) and Ithaca (LON:ITH) all delivered gains.
The second largest contributor was Financials, where the managers singled out the performance of trading platform CMC Markets (LON:CMCX). Also making gains were EM asset manager Ashmore (LON:ASHM) and insurance firm Conduit (LON:CRE).
Basic Materials contributed through the large holding in Rio Tinto (LON:RIO), while the undwerweight in Technology also helped. Towards the end of H1, the managers took advantage of tech sector weakness with a few ‘selective purchases’.
AEI is a popular choice with income investors, justifiably given its 6% yield and rising. Former Shires owners have done well to roll their holdings over in our view.
The current market backdrop is supportive for value stocks, including higher yielders. Now the managers say they are seeing value emerge in sectors where it was previously less evident.
The indiscriminate tech sell-off in April on AI fears has thown up some attractive stock-level opportunities. While AI will disrupt some companies’ business models and reduce profitability, ‘others will remain far more resilient than their valuations imply’, say Moore and Pyle.
This is what shareholders like to hear from active managers. Volatility creates opportunity, and a disciplined approach to stock picking pays dividends, in AEI’s case quite literally.
Read the press release here:
https://www.aberdeeninvestments.com/en-gb/aei/news-and-insights/news
