OREANDA-NEWS. Securities Trust of Scotland (STS) seeks a combination of rising income and long-term capital growth from a concentrated (currently 46 stocks) global portfolio of mainly larger companies. Stocks are chosen for attributes including yield and dividend growth, financial strength and valuation. A new policy to enhance the yield, together with the potential for better underlying performance, could see the shares re-rate to a level closer to peers. The shares had moved to a discount to NAV following a spell of lacklustre performance versus the MSCI World High Dividend Yield Index benchmark in 2014, driven by a combination of geopolitical factors and lack of exposure to some large constituents that performed well.

STS had largely traded at a premium to net asset value following the adoption of a global income strategy in mid-2011. More recently, however, it has moved to a discount to cum-income NAV, which stood at 6.0% on 19 June. After issuing 22m shares to meet excess demand between July 2012 and March 2014, it has bought back 1.6m shares in the past 12 months to help manage the discount. The move to a level of dividend yield more in line with peers (see page 7) has the potential to boost demand and narrow the discount.