JPMorgan Income & Capital results for the year ended 28 February 2015 show the fund generated a total return of 5.4% for the year – this lagged the company’s benchmark (90% FTSE 350 excluding investment trusts index and 10% Barclays Global Aggregate Corporate Bond Index) by 0.4%. Corporate bond returns exceeded returns on equities during the first half of the period and the fund’s underweight position in bonds was one reason why they failed to beat their benchmark.
A fourth interim dividend of 1.7p per Ordinary share was paid on 24th April 2015 to Ordinary shareholders and Unitholders on the register at the close of business on 7th April 2015. That dividend, together with the three interim dividends previously paid, each of 1.625p per Ordinary share, brings the total payment for the year to 6.575p per Ordinary share, an increase of 7.35% over the total dividend of 6.125p per Ordinary share paid in the previous year. The Board anticipates that, in the absence of unforeseen circumstances, the Company will be in a position to maintain the level of quarterly dividend, during the current financial year ending 28th February 2016, at 1.7p per Ordinary share (making a total of 6.80p per Ordinary share for the full year).
John Baker and Sarah Emly’s manager’s report says the best performing stock over the year was Provident Financial, the financial services group which continued to deliver good results and double digit dividend growth, whilst having an attractive dividend yield; this stock delivered returns of 53% over the year. Imperial Tobacco, was also a strong performer as, they believe, its double-digit dividend growth and consistent delivery of strong operating performance became more widely recognised by investors. Direct Line Insurance, one of the UK’s leading motor and home insurers, delivered strong returns over the financial year, consistently beating market expectations of its profit growth, whilst also returning surplus cash to shareholders as special dividends; this stock delivered a return of +37% over the 12 months. Avoiding stocks that fell added considerable relative value. Not holding Tesco, was a positive contributor as this food retailer announced multiple profit warnings, an accounting scandal and then cut its dividend. The portfolio also benefited from not owning the low dividend yielding oil and gas major, BG Group, which delivered disappointing results, even before the sharp fall in the price of oil. However, since the period end BG Group has received a takeover approach from Royal Dutch Shell and consequently its share price bounced strongly.
By contrast, not owning the low dividend yielding pharmaceutical stock, Shire, was detrimental to performance as its share price benefited from takeover speculation. Their holding in Foxtons, the London estate agency business that was floated in 2013, also detracted from performance although we sold this stock before it delivered a disappointing trading update and was demoted into the FTSE Small-Cap index. Other detractors included not owning the two relatively expensively valued consumer goods stocks, Unilever and Reckitt Benckiser, as their share prices rose strongly over the 12 months. Overall, the UK stock selection contributed positively to performance, especially during the second half of the year, whilst being underweight in corporate bonds was unhelpful, as they surprisingly outperformed equities over this most recent financial year.
JPI / JPIU : Bond underweight unhelpful to JPMorgan Income & Capital