The Scottish American Investment Company (LSE: SCAM) is nicknamed Saints. But that doesn’t stop manager Patrick Edwardson investing in sin. Of the investment trust’s portfolio, 5% is in tobacco. The fund aims to deliver real dividend growth to investors so the sector’s reliably high-yielding stocks make the grade.
‘Saints’, created in 1873, has produced impressive income growth. The dividend rose 64% in the ten years to 2009 – the yield is currently 4.34%. Future dividend growth is supported by income reserves of up to 10p a share. However, a steady rise in the dividend hasn’t been reflected in the trust’s capital value – the discount is currently 9.07%.
Recent fluctuations have “given investors a roller-coaster ride”, says Stephen Womack in The Mail on Sunday. The shares slumped 42% in 2008, but are up 78.9% in the last year to 31 March. “We misjudged things in 2008 and didn’t see the credit crunch coming. We have clawed a lot of that back, but still have some way to go,” explains Edwardson.
Edwardson’s portfolio is now diversified well beyond equities, with holdings in commercial property, timber plantations and Brazilian government bonds. He admits he is currently “slightly underweight in equities”, opting for higher-yielding bond markets and UK commercial property, where he thinks there is better value.
He is also moving away from UK stocks, investing in Asia and Latin America instead – 80% of the trust’s returns come from outside Britain. “A lot of the fiscal issues that caused the credit crunch are still not being addressed in the West.” And the most likely outlook for Britain? A “decade of miserable growth”, according to Edwardson.
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Scottish American Investment Co. top ten holdings
| Name of holding | % of assets |
|---|---|
| Athena Debt Opportunities | 4.3 |
| Brazil CPI Linked 15/05/2045 | 4.1 |
| Baillie Gifford High Yield Bond Fund | 3.2 |
| Cambium Global Timberland | 2.8 |
| Baillie Gifford Greater China Fund | 2.4 |
| Quorum Oil & Gas | 1.9 |
| British American Tobacco | 1.8 |
| HSBC Holdings | 1.7 |
| Holiday Village, Romney Sands, Kent | 1.7 |
| Penn West Energy Trust | 1.7 |