Brunner reaches landmark 50 years of consecutive dividend increases – Brunner (BUT) has posted its full year results for the 12 months to 30 November 2021. During the period, its NAV rose by 21.5% on a net dividends reinvested basis with debt at fair value. This was marginally ahead of the composite benchmark index which rose by 21.1% on a total return basis over the same period.
The proposed final dividend of 6.05p, if approved by shareholders, will be paid on 1 April 2022. This represents an increase over the 2020 dividend which was 20.06p and means Brunner has now reached a landmark 50 years of consecutive dividend increases, maintaining its place as one of the AIC’s “Dividend Heroes”.
Statement from the chair:
This is the fourth time of writing to shareholders under the shadow of the COVID-19 pandemic, either in an Annual or Half-Year Report. It remains unclear how close we may be to the end of these conditions.
The individual human and broader social costs have been immense and the future path of the pandemic will influence global economic developments. The ability of economies to open and grow will continue to be balanced against the need to protect the vulnerable and we have seen the impact of frequent and abrupt changes to governments’ responses. Certainly, the middle of 2021 had a very different outlook to either end of the year, though that was also dependent on where in the world you might be living. In 2021, economies reopened strongly earlier in the year, supported by emergency fiscal and monetary policies; supply and labour shortages started to drive a rise in inflation to levels not seen for a decade; and geopolitical instability around the world has steadily increased over the year. Despite these negative factors, recovering economic growth encouraged investors to commit record amounts of capital to flow to financial markets, supporting share price growth, if skewed somewhat towards in-favour sectors.
Brunner is about investing responsibly and sustainably in businesses across the globe with the aim of generating superior returns for the trust’s shareholders. In normal times, company valuations reflect their ability to grow and be profitable. In the current market valuations have often been unduly influenced by sentiment. Sentiment can become distorted and amplified when there is a high degree of uncertainty in the future. Yet most companies have carried on doing what they have always done, adapting to the prevailing situation. Short-term sentiment driven stock markets are not wholly negative for the long-term active investor – such market volatility can prove beneficial where valuations of good quality companies become depressed on the back of wider sentiment, providing opportunity where valuation rigour is an integral part of the investment management process. There is more detail about this in the Investment Manager’s Review on page 22 of the annual report.
Our manager remains alert to the ever-changing variety of extraneous factors which could have an effect in some way on the portfolio’s companies and the investment process remains focused on finding sound businesses with clear business models which have the potential to provide sustainable returns for shareholders over the long term.
Whilst such an approach will inevitably mean missing out on some of the highest returns available – particularly in an environment where global stock markets have been dominated by a few titans of the technology space – it also means less exposure to the volatility that can sometimes accompany these very in-favour companies.
Outlook
There is considerable concern that we may be at a turning point in global stock markets. There has been over a decade of falling interest rates which at their low reached a level where many central banks charged an investor for holding money with them. This is unsustainable unless economies never grow again and as we are now seeing positive global economic growth, and some sharp and possibly sustained rises in inflation, central banks are starting to indicate increasing interest rates and a wind down or reversal of their quantitative easing programmes. This is a big change in the background for markets and it remains to be seen how peacefully such a change can be implemented. The way modern stock markets are structured, with short term activity dominating trading, and geared strategies – often focused on quite narrow areas – offering the prospect of sharp volatile stock market price movements often unrelated to underlying company profit fundamentals. This will provide opportunities for the patient, thoughtful investor but it is likely to be bumpy.
In addition, geopolitical tensions with China and Russia may continue to have a significant impact on market sentiment and particularly on supply chains and energy prices.
For Brunner, we expect to continue to follow the same balanced strategy and approach, investing in well-run companies with high-quality business models but only at a fair price. Brunner remains a long-term balanced equity investment, aiming to provide investors with steady growth in capital as well as a rising income stream.
It is difficult to know whether stock markets will be higher or lower this time next year, but the board have confidence that many of the companies in our portfolio will continue to make good business progress.
BUT : Brunner reaches landmark 50 years of consecutive dividend increases