Edison issues research review on Securities Trust of Scotland (STS)
OREANDA-NEWS. Securities Trust of Scotland (STS) has revamped its investment approach, appointing Martin Currie's income team head Mark Whitehead as lead manager and adopting an unconstrained and high-conviction strategy to meet its objective of producing real growth in capital and income, rather than measuring performance against a backward-looking market index. The more flexible mandate will allow the limited use of options and the gearing facility will be increased. These changes build on a new dividend policy announced by the board last year, which has brought STS's yield into line with its peer group at more than 4%, and the manager's focus on quality companies with sustainable earnings may enhance future performance and help to narrow the trust's discount to NAV.
At 20 June, STS's shares traded at a 3.2% discount to cum-income NAV. This is wider than the three- and five-year historical averages, partly reflecting generally wider investment trust discounts against a backdrop of volatile markets. The board is active in buying back shares to keep the discount below c 7.5%, but there is potential for it to narrow naturally should the trust's new unconstrained and high-conviction approach prove appealing to investors.
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