Mid Wynd achieves modest returns as it increases its dividend – Mid Wynd (MWY) has posted its annual financial report for the year to 30 June 2021. During the period, its share price rose by 27.3% on a total return basis with dividends assumed to be re-invested.
MWY’s net asset value per share increased by 23.2%, in capital terms, and on a total return basis, with dividends assumed to be reinvested, the return was 24.3%. This compares with a rise of 24.6% in the company’s comparator index, the MSCI All Country World Index,
The board is proposing a final dividend of 3.30p per share which, subject to approval by shareholders at the AGM, will be paid on 26 November 2021 to shareholders on the register at the close of business on 1 October 2021. An interim dividend of 3.10p per share was paid in March 2021, an increase of 3.3% from last year.
The total dividend for the current year of 6.40p per share represents an increase of 4.6% on the 6.12p per share paid for the year ended 30 June 2020. The dividend is fully covered by the revenue return for the year. The aim remains to grow dividends progressively subject to the level of revenue reserves available.
Chairman’s outlook:
The total level of debt in the world, relative to the size of the global economy, has probably now exceeded the level at the end of World War Two. While debt in the government sector is not generally as high as it was in 1945, debts in the household and corporate sectors are many times higher than they were when that war ended. The result is almost certainly that the world is now living with the highest level of debt, relative to Gross Domestic Product (GDP), that it has ever lived with. We do not have very good long-run data for global government, household and corporate debt combined but we do know that from 2001 to 2020 it has risen from 190% of GDP to 290% of GDP and it has almost certainly continued to rise rapidly in 2021. This crippling debt burden is already triggering extreme reactions from both central banks and governments trying to assure the ability of both the public and private sectors to successfully service such excessive debt. Such extreme reactions will likely persist for many years and very likely for more than a decade given how long it will take to reduce debt burdens to less dangerous levels. We should expect the need to reduce this debt burden to be the key underlying trend impacting interest rates, inflation, economic growth, government policy and corporate profits for perhaps a generation – as it was in the period from 1945 to the early 1980s. For the long-term investor there can be some confidence that we know where we are going. It is a very different destination from that which investors set out towards forty years ago. Debt-to-GDP levels had been reduced to very low levels due to high levels of post war inflation which reached punishing levels in the 1970s. We are thus not just living through the usual business cycle but through a major structural change. This structural change brings new challenges to investors.
Some shareholders will no doubt be familiar with the novel written by John Buchan, latterly Lord Tweedsmuir, called The Gap in The Curtain. In that novel key characters are given certain knowledge of a future event in their lives, with the assistance of a Professor Moe, and they then plan their lives around that certain event. The consequences from managing their affairs based on the known destination are disastrous as the route to that destination was highly unpredictable. Given the current record high total debt-to-GDP ratio it is very likely that the route to reducing debt burdens will include much higher inflation than we have had to live with in recent decades. However, the lesson from The Gap in The Curtain is that we should not assume that simply planning our investments in light of the likelihood that higher inflation will play a role in reducing debt burdens is a foolproof way to ensure the growth of the purchasing power of our capital. There will be many twists and turns and many of those will likely come from surprising changes in government and central bank policy as they steer us to the desired destination. As stewards of your capital, the Board and Investment Manager are all too aware that, as Warren Buffet famously said, deploying capital to preserve and grow the purchasing power of savings is ‘simple but not easy.’ What we can say about the journey though is that it will require an approach that embraces the need for change in the portfolio and also a need to find corporate management able to cope with change. There are tens of thousands of listed equities for our Manager to choose from in navigating this route and, if we align with the best corporate management, they too will play a key role in navigating us through the uncertainties ahead.
Not every country in the world is burdened with excessively high debt relative to the size of their GDP and our global equity mandate will allow our Company to seek out business environments where our capital is most likely to thrive. Mid Wynd has already divested many of its investments in China, in a timely fashion, in recognition that the current leadership of that country is not pursuing policies that are supportive of good returns on invested capital. The global equity mandate, without any constraint from following an equity index, allows the Investment Manager to invest your capital in the greenest pastures should structural shifts in government policy threaten the purchasing power of your savings whether in China or anywhere else. The Investment Manager thus has a very flexible mandate and invests in companies that can, if we wisely choose those with the right stewardship capabilities, adapt to the twists and turns in the long road that leads us to a lowering of global debt to more sustainable levels.
The initial capital that set our Company on its journey was invested by the Scott family to set up a flax warping mill in Mid Wynd in Dundee in 1797. It has not been plain sailing since then with economic depressions, world wars, extreme government actions and pandemics all impacting returns on capital. However the capital has endured and grown and by selecting good companies, with the right management and at reasonable valuations there is good reason to believe that our Company can continue to endure and prosper.
Managing money is never easy and there are always new challenges. Our Managers have risen to the challenge of a global pandemic to steward our capital with calm and intelligence. Their ability to meet a series of different challenges since their appointment in 2014 should provide shareholders with reassurance that your Company has the ability to adapt to the challenges ahead. I would like to thank them for all their efforts on behalf of Mid Wynd and in particular their efforts over this reporting period which has been particularly challenging for all investors.
MWY : Mid Wynd achieves modest returns as it increases its dividend